Question
Center Brook& Co. owns vast amounts of corporate bonds. Suppose Center Brook buys $500,000 of BitterCo bonds at face value on January 2, 2016. The
Center Brook& Co. owns vast amounts of corporate bonds. Suppose Center Brook buys $500,000 of BitterCo bonds at face value on January 2, 2016. The BitterCo bonds pay interest at the annual rate of 8% on June 30 and December 31 and mature on December 31, 2035. Center BrookCenter Brookintends to hold the investment until maturity.
Requirements
| 1. | Journalize any required 2016 entries for the bond investment. |
| 2. | How much cash interest will Center Brook receive each year from BitterCo? |
| 3. | How much interest revenue will Center Brook report during 2016 on this bond investment? |
Requirement 1. Journalize any required 2016 entries for the bond investment. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)Begin by journalizing Center Brook's investment on January 2, 2016.
| Date | Accounts and Explanation | Debit | Credit | ||
| Jan. 2, 2016 |
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Next, journalize the receipt of cash interest on June 30, 2016.
| Date | Accounts and Explanation | Debit | Credit | ||
| Jun. 30, 2016 |
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Now journalize the receipt of cash interest on December 31, 2016.
| Date | Accounts and Explanation | Debit | Credit | ||
| Dec. 31, 2016 |
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Requirement 2. How much cash interest will Center Brook receive each year from BitterCo?
Center Brook will receive $____of cash interest each year from BitterCo/
Requirement 3. How much interest revenue will Center Brook report during 2016 on this bond investment?
Center Brook will report $____ of interest revenue during 2016 on this bond investment.
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Auditing And Assurance Services
Authors: Timothy Louwers, Penelope Bagley, Allen Blay, Jerry Strawser, Jay Thibodeau
9th International Edition
1266285997, 978-1266285998
