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a)
Bond investment:
Bond investments are debt securities which pay fixed interest revenue to the investor.
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The bond investment transactions in the books of Company P.
(b)
Prepare journal entry to record the semiannual interest revenue received.
(c)
Prepare journal entry for $50,000 bonds of Company M sold at 96%.
(d)
Prepare journal entry for accrued interest.
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Chapter 13 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- 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.arrow_forwardSaverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued 62,500,000 of 10-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of 66,747,178. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) b. The interest payment on June 30, 2017, and the amortization of the bond premium, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for 2016.arrow_forwardTransfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, 100,000 face value bonds had a carrying value of 107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31. On December 31, 2019, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was 105,000. Required: Prepare the journal entries on December 31, 2019, to record the interest earned and the reclassification.arrow_forward
- Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued 15,000,000 of 20-year, 9% callable bonds on May 1, 2016 at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 2016 May 1. Issued the bonds for cash at their face amount. Nov. 1. Paid the interest on the bonds. 2022 Nov. 1. Called the bond issue at 96, the rate provided in the bond indenture. (Omit entry for payment of interest.)arrow_forwardQuestion: Saberhagen Company sold $3,500,000, 8%, 10-year bonds on January 1, 2020. The bonds were dated January 1, 2020, and pay interest annually on January 1. Saberhagen Company uses the straight-line method to amortize bond premium or discount. (a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2017, assuming that the bonds sold at 104. Amortization $14,000 (b) Prepare journal entries as in part (a) assuming that the bonds sold at 98. Amortization $7,000 (c) Show balance sheet presentation for the bonds at December 31, 2017, for both the requirements in (a) and (b). Premium on bonds payable $3,626,000 D0iscount on bonds payable $3,437,000arrow_forwardCrane Company issued $740,000, 10-year, 5% bonds at 103. Prepare the journal entry to record the sale of these bonds on January 1, 2022. Date Account Titles and Explanation Debit Credit Jan. 1 enter an account title to record the sale of these bonds on January 1, 2017enter an account title to record the sale of these bonds on January 1, 2017arrow_forward
- Entries for bond (held-to-maturity) investments Demopoulos Company acquired $151,200 of Marimar Co., 8% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Demopoulos Company sold $48,000 of the bonds for 98. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. Маy 1 b. The semiannual interest received on November 1. Nov. 1 c. The sale of the bonds on November 1. Nov. 1 d. The accrual of $1,376 interest on December 31. Dec. 31arrow_forwardEntries for bond (held-to-maturity) investments Demopoulos Company acquired $187,200 of Marimar Co., 5% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Demopoulos Company sold $44,400 of the bonds for 96. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 - Select - - Select - - Select - - Select - b. The semiannual interest received on November 1. Nov. 1 - Select - - Select - - Select - - Select - c. The sale of the bonds on November 1. Nov. 1 - Select - - Select - - Select - - Select - - Select - - Select - d. The accrual of $1,190 interest on December 31. Dec. 31 - Select - - Select - - Select - - Select -arrow_forwardEntries for bond (held-to-maturity) investments Demopoulos Company acquired $203,400 of Marimar Co., 7% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Demopoulos Company sold $44,400 of the bonds for 99. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 b. The s Nov. 1 Cash Nov. 1 Interest Receivable Interest Revenue Investments-Marimar Co. Bonds c. The sNotes Receivable lovember 1. d. The accrual of $1,855 interest on December 31.arrow_forward
- May 1 and November 1. On November 1, Demopoulos Company sold Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 b. The semiannual interest received on November 1. Nov. 1 c. The sale of the bonds on November 1. Nov. 1 000 d. The accrual of $1,855 interest on December 31. Dec. 31arrow_forwardEntries for bond (held-to-maturity) investments Demopoulos Company acquired $150,000 of Marimar Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Demopoulos Company sold $55,000 of the bonds for 98. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1.arrow_forwardEntries for Investment in Bonds, Interest, and Sale of Bonds Gonzalez Company acquired $206,400 of Walker Co., 7% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $45,000 of the bonds for 96. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank.arrow_forward
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