Problem 17-02 On January 1, 2020, Sweet Company purchased $340,000, 8% bonds of Aguirre Co. for $313,745. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Sweet Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Sweet Company sold the bonds for $315,215 after receiving interest to meet its liquidity needs. Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.) Date Interest Receivable Or Cash Received Interest Revenue Bond Discount Amortization Carrying Amount of Bonds 1/1/20 $ $ $ $ 7/1/20 1/1/21 7/1/21 1/1/22 7/1/22 1/1/23 7/1/23 1/1/24 7/1/24 1/1/25 Total $ $ $ 2. If the fair value of Aguirre bonds is $317,215 on December 31, 2021, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31, 2020, is a debit of $3,709.) 3. Prepare the journal entry to record the sale of the bonds on January 1, 2022.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Problem 17-02
On January 1, 2020, Sweet Company purchased $340,000, 8% bonds of Aguirre Co. for $313,745. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Sweet Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Sweet Company sold the bonds for $315,215 after receiving interest to meet its liquidity needs.
- Prepare the amortization schedule for the bonds. (Round answers to 0 decimal places, e.g. 1,250.)
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Interest Receivable |
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Bond |
Carrying |
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1/1/20 |
$ |
$ |
$ |
$ |
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7/1/20 |
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1/1/21 |
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7/1/21 |
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1/1/22 |
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7/1/22 |
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1/1/23 |
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7/1/23 |
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1/1/24 |
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7/1/24 |
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1/1/25 |
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Total |
$ |
$ |
$ |
2. If the fair
3. Prepare the
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