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On January 1, 2017, Panorama Company purchased $400,000, 8% bonds. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1
| On January 1, 2017, Panorama Company purchased $400,000, 8% bonds. The bonds were purchased to yield 10% interest. | ||||||||||
| Interest is payable semiannually on July 1 and January 1 with the first interest payment to occur on July 1, 2017. | ||||||||||
| The bonds mature on January 1, 2022. Panorama Company uses the effective-interest method to amortize discount or premium. | ||||||||||
| Panorama Company classifies the bonds as available-for-sale. | ||||||||||
| On January 1, 2019, Panorama Company sold the bonds for $370,726 after receiving interest to meet its liquidity needs. | ||||||||||
| Required: | ||||||||||
| (a) | Determine the purchase price and prepare the journal entry to record the purchase of bonds on January 1, 2017. | |||||||||
| (b) | Prepare the amortization schedule for the bonds. | |||||||||
| (c) | Prepare the journal entries to record/accrue the semiannual interest each period. | |||||||||
| (d) | The fair value of the bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry. | |||||||||
| Note that the fair value adjustment balance on December 31, 2017, is a debit of $3,375. | ||||||||||
| (e ) | Prepare the journal entry to record the sale of the bonds on January 1, 2019. | |||||||||
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