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On February 1, Hansen Company purchased $84,000 of 5%, 10-year Knight Company bonds at their face amount plus 1 month's accrued interest. The bonds pay interest on January 1 and July 1. On October 1, Hansen Company sold $30,000 of the Knight Company bonds acquired on February 1, plus 3 months' accrued interest. On December 31, 3 months' interest was accrued for the remaining bonds. Determine the interest earned by Hansen Company on Knight Company bonds for the year.

On February 1, Hansen Company purchased $84,000 of 5%, 10-year Knight Company bonds at their face amount plus 1 month's accrued interest. The bonds pay interest on January 1 and July 1. On October 1, Hansen Company sold $30,000 of the Knight Company bonds acquired on February 1, plus 3 months' accrued interest. On December 31, 3 months' interest was accrued for the remaining bonds. Determine the interest earned by Hansen Company on Knight Company bonds for the year.

Financial Accounting
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 5E
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Interest for bond (held-to-maturity) investments On February 1, Hansen Company purchased $84,000 of 5%, 10-year Knight Company bonds at their face amount plus 1 month's accrued interest. The bonds pay interest on January 1 and July 1. On October 1, Hansen Company sold $30,000 of the Knight Company bonds acquired on February 1, plus 3 months' accrued interest. On December 31, 3 months' interest was accrued for the remaining bonds. Determine the interest earned by Hansen Company on Knight Company bonds for the year.
Transcribed Image Text:Interest for bond (held-to-maturity) investments On February 1, Hansen Company purchased $84,000 of 5%, 10-year Knight Company bonds at their face amount plus 1 month's accrued interest. The bonds pay interest on January 1 and July 1. On October 1, Hansen Company sold $30,000 of the Knight Company bonds acquired on February 1, plus 3 months' accrued interest. On December 31, 3 months' interest was accrued for the remaining bonds. Determine the interest earned by Hansen Company on Knight Company bonds for the year.
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