On January 1, 2020 Apple Inc issued $2,000,000, 6 , 15 year bonds Interest is payable annually with the first payment due on January 1, 2021 Required a) Determine the selling price of these bonds on January 1, 2020, assuming a market rate of interest of 7 (round calculated amounts to nearest dollar) (2 marks) Input Amount N Answer I Y Answer PMT $Answer FV $Answer CPT PV $Answer b) Prepare the journal entry on January 1, 2020 to record the issuance of the bonds (2 marks) Issuance of bond entry Date Account Debit Credit Jan 1, 2020 Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer c) Complete the effective interest amortization table for the first two interest payments of the bond (round all calculations to nearest dollar) (4 marks) Amortization Table Date Interest Payment Interest Expense Amortization Bond Amortized Cost Jan 1, 2020 $Answer Jan 1, 2021 $Answer $Answer $Answer $Answer Jan 1, 2022 $Answer $Answer $Answer $Answer d) Assume the company's year end is December 31, 2020 Prepare the 2020 year end adjusting entry for the interest on the bonds (3 marks) Interest adjustment entry Date Account Debit Credit Dec 31, 2020 Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer e) Prepare the journal entry on January 1, 2021 for the interest payment (2 marks) Interest payment entry Date Account Debit Credit Jan 1, 2021 Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer f) Assume the bonds were redeemed for $2,020,000 on January 1, 2028 The bond's amortized cost was $1,892,000 after the January 1, 2028 interest payment was made and recorded (3 marks) Bond redemption entry Date Account Debit Credit Jan 1, 2028 Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Dr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer Cr AnswerNO ENTRYN ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost bondsnvestment at amortized cost sharesInvestment at FVTPL bondsInvestment at FVTPL sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income lossBond amortization revenue expenseGain loss on bond redemptionGain loss on sale of investmentsGain loss on sale of investments OCIAccount not listed $Answer

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Posted on Jul 03, 2024

On January 1, 2020 Apple Inc. issued $2,000,000, 6%, 15 year bonds. Interest is payable annually with the first payment due on January 1, 2021.

Required a) Determine the selling price of these bonds on January 1, 2020, assuming a market rate of interest of 7% (round calculated amounts to nearest dollar). (2 marks)

Input	Amount
N	Answer
I/Y	Answer%
PMT	$Answer
FV	$Answer

CPT PV $Answer

b) Prepare the journal entry on January 1, 2020 to record the issuance of the bonds. (2 marks)

Issuance of bond entry
Date	Account	Debit	Credit
Jan 1, 2020	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer

c) Complete the effective interest amortization table for the first two interest payments of the bond (round all calculations to nearest dollar). (4 marks)

Amortization Table
Date	Interest Payment	Interest Expense	Amortization	Bond Amortized Cost
Jan 1, 2020				$Answer
Jan 1, 2021	$Answer	$Answer	$Answer	$Answer
Jan 1, 2022	$Answer	$Answer	$Answer	$Answer

d) Assume the company's year end is December 31, 2020. Prepare the 2020 year end adjusting entry for the interest on the bonds. (3 marks)

Interest adjustment entry
Date	Account	Debit	Credit
Dec 31, 2020	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer

e) Prepare the journal entry on January 1, 2021 for the interest payment. (2 marks)

Interest payment entry
Date	Account	Debit	Credit
Jan 1, 2021	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer

f) Assume the bonds were redeemed for $2,020,000 on January 1, 2028. The bond's amortized cost was $1,892,000 after the January 1, 2028 interest payment was made and recorded. (3 marks)

Bond redemption entry
Date	Account	Debit	Credit
Jan 1, 2028	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Dr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed	$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer
	Cr. AnswerNO ENTRYN/ACashAccounts ReceivableDividends ReceivableInterest ReceivableInvestment at amortized cost-bondsnvestment at amortized cost-sharesInvestment at FVTPL-bondsInvestment at FVTPL-sharesInvestment in associatesGoodwillAccounts PayableDividends PayableInterest PayableBonds PayableNotes PayableCommon SharesPreferred SharesRetained earningsSalesCost of Goods SoldAdvertising ExpenseSalaries ExpenseSupplies ExpenseInterest revenueInterest expenseInvestment income/lossBond amortization revenue/expenseGain/loss on bond redemptionGain/loss on sale of investmentsGain/loss on sale of investments-OCIAccount not listed		$Answer