Problem 17-2 On January 1, 2017, Novak Company purchased $370,000, 8% bonds of Aguirre Co. for $341,429. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Novak Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Novak Company sold the bonds for $343,034 after receiving interest to meet its liquidity needs. Your answer is correct. 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 o for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Debt Investments 341,429 Cash 341,429 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.) No. Account Titles and Explanation Debit Credit (1) Cash 1720 Dividend Receivable 1720 (2) Tcash 20 Gain on Sale of Investments 640 Equity Investments TULUUUUCE JIJUHIGGUHO: 2880 (3) Equity Investments 40 Cash 1440 (4) Fair Value Adjustment Unrealized Holding Gain or Loss - Income (5) Cash Prepare the amortization schedule for the bonds. (Round answers to O decimal places, e Schedule of Interest Revenue and Bond Discount Amortization-Effective-Interest Method Bonds Purchased to Yield Interest Receivable Or Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds Date 1/1/17 341,429 7/1/17 1/1/18 7/1/18 1/1/19 llibildid UUUUUUUUU DOLITETIT 7/1/19 1/1/20 7/1/20 1/1/21 *= 1/1/20 *= 7/1/20 *= 1/1/21 TOMON *= 7/1/21 1/1/22 Total Your answer is partially correct. Try again. (c) (d) Prepare the journal entries to record the semiannual interest on (1) July 1, 2017, and (2) December 31, 2017. If the fair value of Aguirre bonds is $345,034 on December 31, 2018, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on January 1, 2017, is a debit of $3,257.) Prepare the journal entry to record the sale of the bonds on January 1, 2019. (e) (Round answers to O 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 o for the amounts.) No. Date Account Titles and Explanation Debit Credit (C) (1) July 1, 2017 Tcash Debt Investments |DOJOD) Interest Revenue (2) Dec. 31, 2017 Interest Receivable Debt Investments Interest Revenue Tinterest Revenue d) Dec. 31, 2018 10000! e) Jan. 1, 2019 Cash Loss on Sale of Investments Debt Investments Problem 17-2 On January 1, 2017, Novak Company purchased $370,000, 8% bonds of Aguirre Co. for $341,429. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Novak Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Novak Company sold the bonds for $343,034 after receiving interest to meet its liquidity needs. Your answer is correct. 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 o for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Debt Investments 341,429 Cash 341,429 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.) No. Account Titles and Explanation Debit Credit (1) Cash 1720 Dividend Receivable 1720 (2) Tcash 20 Gain on Sale of Investments 640 Equity Investments TULUUUUCE JIJUHIGGUHO: 2880 (3) Equity Investments 40 Cash 1440 (4) Fair Value Adjustment Unrealized Holding Gain or Loss - Income (5) Cash Prepare the amortization schedule for the bonds. (Round answers to O decimal places, e Schedule of Interest Revenue and Bond Discount Amortization-Effective-Interest Method Bonds Purchased to Yield Interest Receivable Or Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds Date 1/1/17 341,429 7/1/17 1/1/18 7/1/18 1/1/19 llibildid UUUUUUUUU DOLITETIT 7/1/19 1/1/20 7/1/20 1/1/21 *= 1/1/20 *= 7/1/20 *= 1/1/21 TOMON *= 7/1/21 1/1/22 Total Your answer is partially correct. Try again. (c) (d) Prepare the journal entries to record the semiannual interest on (1) July 1, 2017, and (2) December 31, 2017. If the fair value of Aguirre bonds is $345,034 on December 31, 2018, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on January 1, 2017, is a debit of $3,257.) Prepare the journal entry to record the sale of the bonds on January 1, 2019. (e) (Round answers to O 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 o for the amounts.) No. Date Account Titles and Explanation Debit Credit (C) (1) July 1, 2017 Tcash Debt Investments |DOJOD) Interest Revenue (2) Dec. 31, 2017 Interest Receivable Debt Investments Interest Revenue Tinterest Revenue d) Dec. 31, 2018 10000! e) Jan. 1, 2019 Cash Loss on Sale of Investments Debt Investments