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Q 1: Pierce Company issued 11% bonds, dated January 1, with a principal amount of $800,000 on January 1, 2013. The bonds sold for $739,816
Q 1: Pierce Company issued 11% bonds, dated January 1, with a principal amount of $800,000 on January 1, 2013. The bonds sold for $739,816 and mature in 2032 (20 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Pierce determines interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2013, the fair value of the bonds was $730,000. (4 marks) Required: 1. Prepare the journal entry to record interest on June 30, 2013 (the first interest payment). 2. Prepare the journal entry to record interest on December 31, 2013 (the second interest payment).
Q 1: Pierce Company issued 11% bonds, dated January 1, with a principal amount of $800,000 on January 1, 2013. The bonds sold for $739,816 and mature in 2032 (20 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Pierce determines interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2013, the fair value of the bonds was $730,000. (4 marks)
Required:
1. Prepare the journal entry to record interest on June 30, 2013 (the first interest payment).
2. Prepare the journal entry to record interest on December 31, 2013 (the second interest payment).
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