Question

On January 1, a company purchased 3%, 15-year corporate bonds for $42,359,796 as an investment. The bonds have a face amount of $60 million and are priced to yield 6%. Interest is paid semiannually. Prepare a partial amortization table at the effective interest rate on June 30 and December 31. Prepare the journal entries necessary to record revenue at the effective interest rate on June 30 and December 31. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Amort Table General Journal Prepare a partial amortization table at the effective interest rate on June 30 and December 31. (Round your intermediate calculations to the nearest dollar amount. Enter your answers in whole dollars. Round final answers to the nearest whole dollar.) Period-End Cash Interest Received Bond Interest Revenue Discount Amortization Carrying Value January 1 June 30 December $ $ 900,000 900,000 $ 1,270,794 913,812 370,794 13,812 $42,359,796 41,989,001 % 42,002,813 <Amort Table General Journal >

Answer 1

Cash Interest Received Bond Interest Revenue Discount Amortization Period End January 1 June 30 December 31 Carrying Value 42,359,796 42,730,590 43,112,508 $ 900,000.00 $ 900,000.00 $ 1,270,794 $ 1,281,918 $ 370,794 $ 381,918 $ Note that Cash Interest Received = Face Value of Bond x Coupon Rate Offered x 6 Months/12 Months = $60000000 x 3% x 6months/12months = $900,000.00 Bond Interest Revenue = Carrying Value x Market Rate of Interest x 6 Months/12 Months Discount Amortization = Bond Interest Revenue - Cash Interest Received

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. Jun.30 $ $ 900,000.00 370,794.00 Cash Discount on Investment in Bonds Interest Revenue (To Collection of First Semi annual interest revenue) $ 1,270,794.00 $ $ 900,000.00 381,918.00 Dec.31 Cash Discount on Investment in Bonds Interest Revenue (To Collection of Second Semi annual interest revenue) $ 1,281,918.00