On January 1, 2021, Sweet Acacia Ltd. issued bonds with a maturity value of $5.35 million for $5,132,790, when the market rate of interest was 8%. The bonds have a contractual interest rate of 7% and mature on January 1, 2026. Interest on the bonds is payable semi-annually on July 1 and January 1 of each year. On January 1, 2021, Sheridan Company, a public company, purchased Sweet Acacia Ltd. bonds with a maturity value of $1.07 million to earn interest. On December 31, 2021, the bonds were trading at 99. Both companies year end is December 31.What amount did Sheridan Company pay for Sweet Acacia Ltd.s bonds?

Sheridan Company paid

$

Prepare the journal entry for Sheridan Company (investor) on January 1, 2021.

Date	Account Titles and Explanation	Debit	Credit
Jan. 1
	(To record purchase of investment.)

Prepare a bond amortization schedule for Sheridan Company for the first four interest periods.

Bond Discount Amortization Table Effective Interest Method-Semi-annual Interest Payments 7% Bonds Issued at market rate of 8%
Date		(A) Interest Received		(B) Interest Revenue		(C) Discount Amortization		(D) Bond Amortized Cost
Jan. 1, 2021								$
July 1, 2021		$		$		$
Jan. 1, 2022
July 1, 2022
Jan. 1, 2023

Prepare the journal entries for Sheridan Company to record: (1) The receipt of interest on July 1, 2021.

(2) The accrual of interest on December 31, 2021.

(3) The receipt of interest on January 1, 2022.

SHERIDAN COMPANY Balance Sheet (Partial) Year Ended December 31, 2021Quarter Ended December 31, 2021December 31, 2021
Property, Plant and EquipmentIntangible AssetsShort-Term InvestmentsNon-Current AssetsCurrent Assets
Investments at Amortized CostInterest ReceivableInterest PayableBonds PayableShort-Term Investment in Bonds at Amortized CostBonds		$
Property, Plant and EquipmentCurrent AssetsIntangible AssetsNon-Current AssetsShort-Term Investments
Short-Term Investment in Bonds at Amortized CostBondsInvestments at Amortized CostInterest PayableBonds PayableInterest Receivable		$

Show how the bonds and related income statement accounts would be presented in Sheridan Companys financial statements for the year ended December 31, 2021.

SHERIDAN COMPANY Income Statement (Partial) Quarter Ended December 31, 2021Year Ended December 31, 2021December 31, 2021
Other ExpensesNet Income / (Loss)Total RevenuesOther RevenuesTotal Expenses
Loss on Sale of BondsInterest RevenueInterest ExpenseInvestment Income or LossGain on Sale of Bonds		$

Prepare the journal entry for Sweet Acacia Ltd. (investee) on January 1, 2021.

Date	Account Titles and Explanation	Debit	Credit
Jan. 1
	(To record issuance of bonds payable.)

Prepare the journal entries for Sweet Acacia Ltd. to record: (1) The payment of interest on July 1, 2021.

(2) The accrual of interest expense on December 31, 2021.

(3) The payment of interest on January 1, 2022.

SWEET ACACIA LTD. Balance Sheet (Partial) Quarter Ended December 31, 2021Year Ended December 31, 2021December 31, 2021
Non-Current LiabilitiesCurrent AssetsShort-Term InvestmentsLong-Term InvestmentsCurrent Liabilities
Interest ReceivableLong-Term Investment in Bonds at Amortized CostBondsBonds PayableInterest PayableShort-Term Investment in Bonds at Amortized CostBonds		$
Long-Term InvestmentsShort-Term InvestmentsCurrent AssetsCurrent LiabilitiesNon-Current Liabilities
Short-Term Investment in Bonds at Amortized CostBondsInterest ReceivableBonds PayableLong-Term Investment in Bonds at Amortized CostBondsInterest Payable		$

Show how the bonds and related income statement accounts would be presented in Sweet Acacia Ltd.s financial statements for the year ended December 31, 2021.

SWEET ACACIA LTD. Income Statement (Partial) Year Ended December 31, 2021Quarter Ended December 31, 2021December 31, 2021
Total ExpensesOther RevenuesTotal RevenuesOther ExpensesIncome / (Loss)
Loss on Sale of BondsInvestment Income or LossInterest RevenueInterest ExpenseGain on Sale of Bonds		$