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On January 1, 2020, Culver Company purchased $336,000 worth of 8% bonds of Aguirre Co. for $310,055. The bonds were purchased to yield 10% interest.

On January 1, 2020, Culver Company purchased $336,000 worth of 8% bonds of Aguirre Co. for $310,055. The bonds were purchased to yield 10% interest. Interest is payable semi-annually, on July 1 and January 1. The bonds mature on January 1, 2025. Culver Company uses the effective interest method to amortize the discount or premium. On January 1, 2022, to meet its liquidity needs, Culver Company sold the bonds for $311,410, after receiving interest.

Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as FV-OCI. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1

eTextbook and Media

List of Accounts

Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 5,275.)

Schedule of Interest Revenue and Bond Discount AmortizationEffective-Interest Method
Date Interest Receivable Or Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds
1/1/20 $
7/1/20 $ $ $
12/31/20
7/1/21
12/31/21
7/1/22
12/31/22
7/1/23
12/31/23
7/1/24
12/31/24
Total $ $ $

eTextbook and Media

List of Accounts

Prepare the journal entries to record the semi-annual interest on July 1, 2020, and December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

July 1

Dec. 31

eTextbook and Media

List of Accounts

Assuming the fair value of Aguirre bonds is $313,090 on December 31, 2021, prepare the necessary adjusting entry. (Assume that the fair value adjustment on December 31, 2020 was a debit of $2,835.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

eTextbook and Media

List of Accounts

Prepare the journal entry to record the sale of the bonds on January 1, 2022, including reclassifying holding gains or losses to net income. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1

(To adjust to fair value at date of disposal)

Jan. 1

(To record disposal)

Jan. 1

(To reclassify holding loss)

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