The following transactions relate to bond investments of Livermore Laboratories. The companys fiscal year ends on December
Question:
The following transactions relate to bond investments of Livermore Laboratories. The company’s fiscal year ends on December 31. Livermore uses the straight-line method to determine interest.
Required:
1. Prepare the appropriate journal entries for these long-term bond investments.
2. By how much will Livermore Labs’ earnings increase in each of the three years as a result of these investments? (Ignore income taxes.)
2024 July 1 Oct. 1 Dec. 1 31 2025 Jan. 1 June 1 July 1 Sept. 1 Dec. 1 31 2026 Jan. 1 Feb. 28 Dec. 31 Purchased $16 million of Bracecourt Corporation 10% debentures, due in 20 years (June 30, 2044), for $15.7 million. Interest is payable on January 1 and July 1 of each year. Purchased $30 million of 12% Framm Pharmaceuticals debentures, due May 31, 2034, for $31,160,000 plus accrued interest. Interest is payable on June 1 and December 1 of each year. Received interest on the Framm bonds. Accrued interest. Received interest on the Bracecourt bonds. Received interest on the Framm bonds. Received interest on the Bracecourt bonds. Sold $15 million of the Framm bonds at 101 plus accrued interest. Received interest on the remaining Framm bonds. Accrued interest. Received interest on the Bracecourt bonds. Sold the remainder of the Framm bonds at 102 plus accrued interest. Accrued interest.
Step by Step Answer:
Journal entries for longterm bond investments July 1 2024Debit Cash 15700000Credit Bond Investment B...View the full answer
Related Video
A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
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