Journal Entries:
No. | Account title and explanation | Debit | Credit |
(a) | Held-to-maturity Bonds | $56,551 | |
Cash | $56,551 | ||
[To record purchase of the investment] | |||
(b) | Cash* | $1,820 | |
Interest income ** | $1,414 | ||
Held-to-maturity Bonds*** | $406 | ||
[To record receipt of semi-annual interest and premium amortization] |
Calculations
*Semi-annual interest received = Face value x Interest rate
= $52,000 x 7% x 6/12
= 1,820
**Interest income = Carrying value of the bond x effective interest rate
= $56,551 x 5% x 6/12
=$1,414
***Premium amortization = Cash received - Interest income
=1,820-1,414
=$406
Sheridan Corporation purchased on January 1, 2020, as a held-to-maturity investment, $52,000 of the 7%, 5-year...
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Carla Company purchased, on January 1, 2017, as a
held-to-maturity investment, $66,000 of the 8%, 5-year bonds of
Chester Corporation for $60,996, which provides an 10%
return.
Prepare Carla’s journal entries for (a) the purchase of the
investment, and (b) the receipt of annual interest and discount
amortization. Assume effective-interest amortization is used.
(Round answers to 0 decimal places, e.g. 1,225. Credit
account titles are automatically indented when amount is entered.
Do not indent manually. If no entry is required,...
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mature January 1, 2025, with interest received on January 1 of each
year. Headland Company uses the effective-interest method to
allocate unamortized discount or premium. The bonds are classified
in the held-to-maturity category.
(a) Prepare the journal entry at the date of the bond purchase.
(Enter answers...
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