Question
On January 1, 2020, Tamarisk Company purchased $350,000, 8% bonds of Aguirre Co. for $322,973. The bonds were purchased to yield 10% interest. Interest is
On January 1, 2020, Tamarisk Company purchased $350,000, 8% bonds of Aguirre Co. for $322,973. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Tamarisk Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, TamariskCompany sold the bonds for $324,733 after receiving interest to meet its liquidity needs.
Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when 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.)
| Date | Account Titles and Explanation | Debit | Credit |
| Jan. 1, 2020 | |||
eTextbook and Media
List of Accounts
Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.)
| Schedule of Interest Revenue and Bond Discount AmortizationEffective-Interest Method Bonds Purchased to Yield | ||||||||
| Date | Interest Receivable Or Cash Received | Interest Revenue | Bond Discount Amortization | Carrying Amount of Bonds | ||||
| 1/1/20 | $ | $ | $ | $ | ||||
| 7/1/20 | ||||||||
| 1/1/21 | ||||||||
| 7/1/21 | ||||||||
| 1/1/22 | ||||||||
| 7/1/22 | ||||||||
| 1/1/23 | ||||||||
| 7/1/23 | ||||||||
| 1/1/24 | ||||||||
| 7/1/24 | ||||||||
| 1/1/25 | ||||||||
| Total | $ | $ | $ | |||||
eTextbook and Media
List of Accounts
| (c) | Prepare the journal entries to record the semiannual interest on (1) July 1, 2020, and (2) December 31, 2020. | |
| (d) | If the fair value of Aguirre bonds is $326,733 on December 31, 2021, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31, 2020, is a debit of $3,212.) | |
| (e) | Prepare the journal entry to record the sale of the bonds on January 1, 2022. |
(Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when 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.)
| No. | Date | Account Titles and Explanation | Debit | Credit | ||
| (c) | (1) |
| ||||
| (2) |
| |||||
| (d) | July 1, 2020Dec. 31, 2020Dec. 31, 2021Jan. 1, 2022 | |||||
| (e) |
| |||||
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Corporate Accounting Vol 1
Authors: Dr S. Kr. Paul, Prof. Chandrani Paul
1st Edition
164725146X, 9781647251468
