On August 1, 2021, Sheffield Corporation, a public company, purchased $86,400 of Alaska Ltd. five-year, 7% bonds at par. The bondswere purchased for trading purposes and pay interest semi-annually on January 31 and July 31 of each year. On December 31, 2021.Sheffield's year end, the bonds' fair value was $86,860. The bonds were sold on February 1, 2022, for $87,720.Indicate how the investment is presented on Sheffield Corporation's December 31, 2021, balance sheet.Long-Term InvestmentsInvestment in AssociateJan. 31Date Account Titles and ExplanationCashInterest ReceivableRecord the receipt of the first interest payment on January 31, 2022. (Credit account titles are automatically indented whenthe amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enterO for the amounts. Round answer to 0 decimal places, e.g. 5,276.)Interest RevenueSHEFFIELD CORPORATIONBalance Sheet (Partial)December 31, 2021(Collection of interest receivable.)Feb. 1CashDate Account Titles and ExplanationInvestments at FVTPLAssetsInvestment Income or Loss9(To record sale of bonds.)DebitRecord the sale of the bonds on February 1, 2022. (Credit account titles are automatically indented when the amount isentered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for theamounts.)864003024101IIIDebitCredit877202520Credit504864001320

SHEFFIELD CORPORATION BALANCE SHEET (PARTIAL) For the year ended December 31, 2021…

Answered: On August 1, 2021, Sheffield…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

See similar textbooks

Similar questions

On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?
Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.

Recommended textbooks for you

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

Financial Accounting

Accounting

ISBN:

9781305088436

Author:

Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:

Cengage Learning

Cornerstones of Financial Accounting

Accounting

ISBN:

9781337690881

Author:

Jay Rich, Jeff Jones

Publisher:

Cengage Learning

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

Financial Accounting

Accounting

ISBN:

9781305088436

Author:

Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:

Cengage Learning

Cornerstones of Financial Accounting

Accounting

ISBN:

9781337690881

Author:

Jay Rich, Jeff Jones

Publisher:

Cengage Learning

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SEE MORE TEXTBOOKS