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On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020

On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020

Intermediate Accounting: Reporting And Analysis
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 7C
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On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020
Transcribed Image Text:On January 1, 2020, Splish Company purchased $300,000, 6% bonds of Cabana Co. for $313,128. The bonds were purchased to yield 5% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Splish Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Splish Company sold the bonds for $305,400 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020
Expert Solution
Step 1

Journal entry - It refers to the process where the business transactions are recorded in the books of accounts for the first time.

The double-entry system becomes a base for the purpose of recording the journal entry.

A transaction is documented on the same day that it occurs, hence it is also known as Day Book.

Journal entry types:

  • Transfer entries
  • Closing entries
  • Adjusting entries
  • Compound entries
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