Homework Answers
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
Add Answer to:
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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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On January 1, 2020, Headland Company purchased 9% bonds having a
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