Question

Problem 17-2 On January 1, 2017, Crane Company purchased $310,000, 6% bonds of Aguirre Co. for $284,855. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Crane Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Crane Company sold the bonds for $286,344 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 o for the amounts.) Debit Credit Date Account Titles and Explanation Jan. 1, 2017 LINK TO TEXT Prepare the amortization schedule for the bonds. (Round answers to o decimal places, e.g. 1,250. Schedule of Interest Revenue and Bond Discount Amortization Effective Interest Method Bonds Purchased to Yield Interest Receivable Bond Or Interest Discount Cash Received Revenue Amortization Carrying Amount of Bonds Date 1/1/17

Answer 1

Debit Credit

Answer-(a) : 6%Bonds of Acquirre Co. 2,84,855

To Bank/Cash A/c 2,84,855

Answer-(c) 01.07.17 Bank A/c Dr 9300

To Interest received on Bonds 9300

31.12.17 Bank A/c Dr. 9300

To Interest Received on Bonds 9300

Answer(d) 31.12.17 6% Bonds Dr. 3489

To fair Value Adjustments A/c 3489

Answer (e) 01.01.2019 Bank A/c Dr. 286344

Loss on sale of investments A/c Dr. 2000

To 6% Bonds 2,88,344