Problem 17 2 On January 1, 2017, Novotna Company purchased $400,000, 8 bonds of Aguirre Co for $369,114 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 Novotna Company uses the effective interest method to amortize discount or premium On January 1, 2019, Novotna Company sold the bonds for $370,726 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, 2017 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 17 $ $ $ $ 7 1 17 1 1 18 7 1 18 1 1 19 7 1 19 1 1 20 7 1 20 1 1 21 7 1 21 1 1 22 Total $ $ $ (c) Prepare the journal entries to record the semiannual interest on (1) July 1, 2017, and (2) December 31, 2017 (d) If the fair value of Aguirre bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry (Assume the fair value adjustment balance on January 1, 2017, is a debit of $3,375 ) (e) Prepare the journal entry to record the sale of the bonds on January 1, 2019 (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) July 1, 2017 (2) Dec 31, 2017 (d) Dec 31, 2018 (e) Jan 1, 2019 Click if you would like to Show Work for this question Open Show Work Question Attempts 0 of 3 used Save for later Submit Answer

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Problem 17-2 On January 1, 2017, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest.

Problem 17-2

On January 1, 2017, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. 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. Novotna Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Novotna Company sold the bonds for $370,726 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, 2017

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
1/1/17	$	$	$	$
7/1/17
1/1/18
7/1/18
1/1/19
7/1/19
1/1/20
7/1/20
1/1/21
7/1/21
1/1/22
Total	$	$	$

(c)		Prepare the journal entries to record the semiannual interest on (1) July 1, 2017, and (2) December 31, 2017.
(d)		If the fair value of Aguirre bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on January 1, 2017, is a debit of $3,375.)
(e)		Prepare the journal entry to record the sale of the bonds on January 1, 2019.

(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.)