Keyser Company acquired $3,514,000 face value, 9% bonds as an available-for-sale investment on January 1 of the current year when the market rate of interest was 11%. Interest is paid annually each December 31. Keyser purchased the bonds, which mature in 12 years, for $3,057,717. Keyser amortizes the discount using the effective interest rate method. The fair value of the bonds at the end of the year is $3,010,000. Prepare the journal entries required on the date of acquisition and at the end of the first year after acquisition. (Record debits first, then credits. Exclude explanations from any journal entries.)

Keyser Company acquired $3,514,000 face value, 9% bonds as an available-for-sale investment on January 1 of the current year when the market rate of interest was 11%. Interest is paid annually each December 31. Keyser purchased the bonds, which mature in 12 years, for $3,057,717. Keyser amortizes the discount using the effective interest rate method. The fair value of the bonds at the end of the year is $3,010,000. Prepare the journal entries required on the date of acquisition and at the end of the first year after acquisition. (Record debits first, then credits. Exclude explanations from any journal entries.)

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 1E: Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount....

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Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold 50,000 of the bonds for 96. Journalize entries to record the following: a. The initial acquisition of the bonds on May 1. b. The semiannual interest received on November 1. c. The sale of the bonds on November 1. d. The accrual of 1,000 interest on December 31, 2016.
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