Answered step by step
Verified Expert Solution
Question
1 Approved Answer
will rate thanks On January 1, 2025, Buffalo Company purchased $410,000,8% bonds of Aguirre Co. for $378,339. The bonds were purchased to yield 10% interest.
will rate thanks
On January 1, 2025, Buffalo Company purchased $410,000,8% bonds of Aguirre Co. for $378,339. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2030, Buffalo Company uses the effective-interest method to amortize discount or premium. On January 1, 2027, Buffalo Company sold the bonds for $380,070 after receiving interest to meet its liquidity needs. (a) 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. (List debit entry before credit entry. 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 tittes and enter O for the amounts.) (c) Prepare the journal entries to record the semiannual interest on July 1, 2025, and December 31, 2025. (d) If the fair value of Aguirre bonds is $382,070 on December 31, 2026, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31,2025 , is a debit of $3,089.) (e) Prepare the journal entry to record the sale of the bonds on January 1, 2027. (List all debit entries before credit entries. 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. Round answers to 0 decimal ploces, eg. 1,225. Record journal entries in the order presented in the problem.) Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started