Question
OnJanuary1,2019,KisumuLimitedCo.purchasedKshs160,000of6%bondsfor168,300(a 5%effectiveinterestrate)asanon-tradinginvestment.InterestispaidonJuly1andJanuary1 andthebondsmatureonJanuary1,2024. Required: (a)PreparethejournalentryonJanuary1,2019. (2marks) (b)ThebondsaresoldonNovember1,2019at105plusaccruedinterest.Recordamortization andinterestrevenueontheappropriatedatesbytheeffective-interestmethod(roundtothe nearestdollar).Prepareallentriesrequiredtoproperlyrecordthesale. (6marks) (c)Statefourreasonsthatmakecompaniestransferorsellreceivablestoother companies? (2marks) (d)DifferentiateAssignmentfromfactoringasrelatesreceivables.(4marks) (e)Distinguishbetweentradediscountandcashdiscountasusedinaccountingfor receivables.
OnJanuary1,2019,KisumuLimitedCo.purchasedKshs160,000of6%bondsfor168,300(a 5%effectiveinterestrate)asanon-tradinginvestment.InterestispaidonJuly1andJanuary1 andthebondsmatureonJanuary1,2024. Required: (a)PreparethejournalentryonJanuary1,2019. (2marks) (b)ThebondsaresoldonNovember1,2019at105plusaccruedinterest.Recordamortization andinterestrevenueontheappropriatedatesbytheeffective-interestmethod(roundtothe nearestdollar).Prepareallentriesrequiredtoproperlyrecordthesale. (6marks) (c)Statefourreasonsthatmakecompaniestransferorsellreceivablestoother companies? (2marks) (d)DifferentiateAssignmentfromfactoringasrelatesreceivables.(4marks) (e)Distinguishbetweentradediscountandcashdiscountasusedinaccountingfor receivables.
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Auditing Assurance And Risk
Authors: W. Robert Knechel, Steve Salterio, Brian Ballou
3rd Edition
