Question
Mickey Corporation purchased $54,000, 6%, 15-year bonds of Minnie Corporation for $57,000 cash on December 31, 2016. The bonds pay interest semi-annually each June 30
Mickey Corporation purchased $54,000, 6%, 15-year bonds of Minnie Corporation for $57,000 cash on December 31, 2016. The bonds pay interest semi-annually each June 30 and December 31. On December 31, 2017, the fair market value of the bonds is $52,000. Mickey uses the straight-line method of amortization.
REQUIRED:
A. Indicate the following amounts:
Face Value
Stated Rate
Annual Stated Interest
Semi-Annual Stated Interest
Price of the Bonds
Premium or Discount (circle one)
B. Assuming the bonds are purchased as held to maturity securities, give the general journal entries necessary to record the investment in the bonds for 2016 and 2017.
C. Indicate the financial statement presentation of the bond investment accounts on December 31, 2017:
Income Statement: Balance Sheet:
D. If the bonds are sold on December 31, 2026 for $59,000, give the general journal entry to record the sale.
E. Assuming INSTEAD that the bonds were purchased as available for sale securities on JUNE 30, 2017 and the company has no intent to hold the investments for a period longer than one year, indicate the financial statement presentation of the bond investment accounts on December 31, 2017.
Income Statement: Balance Sheet:
F. Assuming INSTEAD that the bonds were purchased as trading securities on JUNE 30, 2017 and the company has no intent to hold the investments for a period longer than one year, indicate the financial statement presentation of the bond investment accounts on December 31, 2017. Income Statement: Balance Sheet:
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