On July 1, 2017, Givarz Corporation, a public company, purchased $300,000 of Schuett Corp. 10-year, 3% bonds
Question:
On July 1, 2017, Givarz Corporation, a public company, purchased $300,000 of Schuett Corp. 10-year, 3% bonds at 91.8 when the market rate of interest was 4%. Interest is received semi-annually on July 1 and January 1. Givarz's year end is December 31. Givarz intends to hold the bonds until July 1, 2027, the date the bonds mature. The bonds were trading at 96 on December 31, 2017.
Instructions
(a) Record the purchase of the bonds on July 1, 2017.
(b) Prepare the adjusting entry required at December 31, 2017.
(c) Show the financial presentation of the investment in Schuett Corp.'s bonds on December 31, 2017.
(d) Prepare the entry to record the receipt of interest on January 1, 2018.
(e) Prepare the entry to record the receipt of interest on July 1, 2018.
(f) Prepare the entry to record the receipt on maturity of the bonds on July 1, 2027. Assume the entry to record the last interest payment has been recorded.
(g) How would your answers to parts (a) and (b) change if the bonds were purchased for the purpose of trading?
TAKING IT FURTHER
What was the market interest rate on December 31, 2017, when the bonds were trading at 96?
MaturityMaturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
2017 a July 1 LongTerm Investments at AC Bonds 275400 Cash 300000 918 275400 b Dec 31 Interest Recei...View the full answer
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
