On March 31, 2007 the Brodie Corporation acquired bonds with a par value of $400,000 for $425,800.
Question:
On March 31, 2007 the Brodie Corporation acquired bonds with a par value of $400,000 for $425,800. The bonds are due December 31, 2012, carry a 12% annual interest rate, pay interest on June 30 and December 31, and are being held to maturity. The accrued interest is included in the acquisition price of the bonds. The company uses straight-line amortization.
Required
1. Prepare journal entries for Brodie to record the purchase of the bonds and the first two interest receipts.
2. If the company failed to separately record the interest at acquisition, explain the errors that would occur in the company’s financial statements (no calculations are required).
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
Step by Step Answer:
1 2007 Mar 31 Investment in HeldtoMaturity Debt Securities 413800 Interest Revenue 40...View the full answer
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
