ZuoTi.Pro
Question

On January 1, 2017, BAJA Corporation purchased bonds with a face value of $600,000 for $616,747.06...

On January 1, 2017, BAJA Corporation purchased bonds with a face value of $600,000 for $616,747.06 The bonds are due June 30, 2020, carry a 13% stated interest rate, and were purchased to yield 12%. Interest is payable semiannually on June 30 and December 31. On March 31, 2018, in contemplation of a major acquisition, the company sold one-half the bonds for $319,000 including accrued interest; the remainder were held until maturity.

  1. Prepare an investment interest income and bond premium amortization schedule using the effective interest method.
  2. Prepare the journal entries to record the purchase of the bonds.
  3. Prepare the journal entries to record each interest payment.
  4. Prepare the journal entries to record the partial sale of the investment on March 31, 2018, and the retirement of the bond issue on June 30, 2020.
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Interest receipt Interest income credit balance in credit balance in (coupon rate(market rate x Amortizationbond premiumbond receivableBook value Date book value) of bond of bond 4 5 01-Jan-17 6 30-Jun-17 7 30-Jun-18 account account S39,000.00 S39,000.00 S37,004.82 S1,995.18 S36,885.11S2,114.89 $16,747.06 $14.751.88 $12,637.00 $6,00,000.00 S6,16,747.06 $6,00,000.00 S6,14,751.88 $6,00,000.00 S6,12,637.00 8 31-Dec-18 9 30-Jun-19 10 31-Dec-19 11 30-Jun-20 S39,000.00 S39,000.00 S39,000.00 S39,000.00 S36,758.22S2,241.78 $36,623.71 $2,376.29 S36,481.14S2,518.86 S36,330.00S2,670.00 $10,395.22 $8,018.93 $5,500.07 $2.830.07 $6,00,000.00 S6,10,395.22 $6.00,000.00 $6,08,018.93 $6,00,000.00 S6,05,500.07 $6,00,000.00 S6,02,830.07 12 31-Dec-20 S39,000.00 $36,169.80S2,830.20 SO $6.00,000.00$6.00.000Interest income credit balance in credit balance Interest receipt (market rate x book Amortizationbond premiuin bond value of4 Date 5 01-Jan-17 Investment in bonds Debit S6,00,000.00 $16,747.06 Accounts title and explanations Credit Premium on bonds Cash $6,16,747.00 (To record the estment in bonds and premin 9 30-Jun-17 Cash 10 S39,000.00 Premium on bonds $1,995.18 $37,004.82 Interest revenue (To record the interest income 12 13 31-Dec-17 cash recogni S39,000.00 S2,114.89 $36,885.11 mium on bonds 15 Interest revenue (To record the interest income 16 17 31-Mar-18 Interest receivable 18 19 recognized) S19,500.00 Premium on bonds Interest revenue S1,120.89 $18,379.11 To record interest receivable for 3 months 20E33 21 31-Mar-18 Cash S3,19,000.00 Interest receivable Premilim investment in bonds gain on sale 9.750.00 S5,758.05 S3,00,000.00 S3.491.95 on bonds To record the parcial sale 7 30-Jun-20 Cash S19,500.00 2 premium on bonds Interest revenue S1,335.00 S18,165.00 To record interest income 31 30-Jun-20 cash 300000 Investment in bonds To record retirement of bond 300000 35122 4 Date 5 42736 Investment in bonds 6 7 Debit 600000 16747.06 Accounts title and explanatious Credit Premium on bonds Cash

0 0
Add a comment
Know the answer?
Add Answer to:
On January 1, 2017, BAJA Corporation purchased bonds with a face value of $600,000 for $616,747.06...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Journal Entries Amort Effective Interest Complete the following questions. In addition to answering the items below...

    Journal Entries Amort Effective Interest Complete the following questions. In addition to answering the items below, you must submit an analysis of the assignment. Analyze the specific outcomes and write an analysis directed toward the team at BAJA Corporation describing what the numbers mean and how they relate to the business. Submit journal entries in the Excel file included in the module section and written segments in an MS Word document. For written answers, please make sure your responses are...

  • Complete the following questions. In addition to answering the items below, you must submit an analysis...

    Complete the following questions. In addition to answering the items below, you must submit an analysis of the assignment. Analyze the specific outcomes and write an analysis directed toward the team at BAJA Corporation describing what the numbers mean and how they relate to the business. Submit journal entries in the Excel file included in the module section and written segments in an MS Word document. For written answers, please make sure your responses are well-written, formatted per CSU-Global Guide...

  • Journal Entries Amortization Schedule Straight-Line Amortization Effective Interest Option #1: Investments in Debt Securities Complete the...

    Journal Entries Amortization Schedule Straight-Line Amortization Effective Interest Option #1: Investments in Debt Securities Complete the following questions. In addition to answering the items below, you must submit an analysis of the assignment. Analyze the specific outcomes and write an analysis directed toward the team at BAJA Corporation describing what the numbers mean and how they relate to the business. Submit journal entries in the Excel file included in the module section and written segments in an MS Word document....

  • On November 1, 2015, Reid Corporation acquired bonds with a face value of $700,000 for $673,618.61....

    On November 1, 2015, Reid Corporation acquired bonds with a face value of $700,000 for $673,618.61. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2020. On November 1, 2016, in contemplation of a major acquisition, the bonds were sold for $700,000. Reid is on a fiscal year accounting period ending October 31...

  • Purchases, discount amortization, and sales of bond investments On November 1, 2017, Reid corporation acquired bonds...

    Purchases, discount amortization, and sales of bond investments On November 1, 2017, Reid corporation acquired bonds with a face value of $700,000 for $673,618.61. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2021. On November 1, 2018, in contemplation of a major acquisition, the bonds were sold for $700,000. Reid is on...

  • Glover Corporation purchased bonds with a face value of $300,000 for $307,493.34 on January 1, 2018....

    Glover Corporation purchased bonds with a face value of $300,000 for $307,493.34 on January 1, 2018. The bonds carry a face rate of interest of 12%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, are due December 31, 2020, and were purchased to yield 11%. On January 1, 2019, in contemplation of a major acquisition, the bonds were sold for $300,000. Glover uses the effective interest method. Required: 1. Prepare journal entries...

  • On November 1, 2017, Reid Corporation acquired bonds with a face value of $500,000 for $481,156.15....

    On November 1, 2017, Reid Corporation acquired bonds with a face value of $500,000 for $481,156.15. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2021. On November 1, 2018, in contemplation of a major acquisition, the bonds were sold for $500,000. Reid is on a fiscal year accounting period ending October 31...

  • 13-5 2134 Bond 13.2 pany's bon issue on December 31, 2021. the purchase of the bonds,...

    13-5 2134 Bond 13.2 pany's bon issue on December 31, 2021. the purchase of the bonds, each interest receipt, and the retirement of the LEVEL TOMS Tred to separately record the interest atacuisition in the company stancial statements (no calculations are required) interest at acquisition, explain the errors that would Bond Investment Premium Amorti amortization Schedule Mercer Corporation acquired $400,000 olan pany's bonds on June 30, 2019, for $409 2019. for $409,991.12. The bonds carry a 12% stated interest rate...

  • 4 On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value...

    4 On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $220,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)...

  • 4 On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value...

    4 On January 1, 2018, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $220,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT