Question

On January 1, 2020, Wildhorse Company purchased $300,000, 6% bonds of Aguirre Co. for $275,666. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January effective-interest method to amortize discount or premium. On January 1, 2022, Wild horse Company sold the bonds for $277,397 after receiving interest to meet its liquidity needs. The bonds mature on January 1, 2025. Wildhorse Company uses the 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 automa tically 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.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 eTextbook and Media List of Accounts

Answer 1

(a)

Date	Account Title	Debit	Credit
1/1/2020	Bonds of Aguirre co.	$275,666.00
	Cash		$275,666.00
	(To record purchase of bonds)

(b)

Schedule of Interest revenue and bond discount
Date	Interest Receivable or Cash Received	Interest Revenue	Bond discount amortization	Carrying amount of bonds
1/1/2020				$    275,666
7/1/2020	$             9,000	$           11,027	$              2,027	$    277,693
1/1/2021	$             9,000	$           11,108	$              2,108	$    279,801
7/1/2021	$             9,000	$           11,192	$              2,192	$    281,993
1/1/2022	$             9,000	$           11,280	$              2,280	$    284,273
7/1/2022	$             9,000	$           11,371	$              2,371	$    286,644
1/1/2023	$             9,000	$           11,466	$              2,466	$    289,110
7/1/2023	$             9,000	$           11,564	$              2,564	$    291,674
1/1/2024	$             9,000	$           11,667	$              2,667	$    294,341
7/1/2024	$             9,000	$           11,774	$              2,774	$    297,115
1/1/2025	$             9,000	$           11,885	$              2,885	$    300,000

(c)

Date	Account Title	Debit	Credit
7/1/2020	Cash	$     9,000.00
	Bonds of Aguirre co.	$     2,027.00
	Interest revenue		$   11,027.00
	(To record semiannual interest)

Date	Account Title	Debit	Credit
12/3/2020	Cash	$     9,000.00
	Bonds of Aguirre co.	$     2,108.00
	Interest revenue		$   11,108.00
	(To record semiannual interest)

(d)

Date	Account Title	Debit	Credit
12/31/2021	Unrealized gain/ loss - OCI	$     4,876.00
	Bonds of Aguirre co.		$     4,876.00
	(To record fair value adjustment)

(e)

Date	Account Title	Debit	Credit
1/1/2022	Cash	$277,397.00
	Loss on sale of Investment	$     2,000.00
	Bonds of Aguirre co.		$279,397.00