Intermediate Accounting: Reporting and Analysis, 2017 Update
2nd Edition
ISBN: 9781337116619
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 7RE
To determine
Prepare the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
On April 1, 2017 the Reba Company purchased 10%, $800,000 bonds of the Trading Up Company at par plus accrued interest. These bonds were classified as an investment in trading securities. The bonds pay interest on June 30 and December 31 each year. The entry by Reba on April 1, 2017, would include a
debit to Investment in Trading Securities of $820,000
debit to Interest Expense of $20,000
credit to Interest Income of $20,000
credit to Cash of $820,000
On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest. The bonds mature on January 1, 2016. Amortization is recorded when interest is received by the straight-line method (by months and round to the nearest dollar). (Assume bonds are available for sale.)
a) Prepare the entry for May 1, 2010.
b) The bonds are sold on August 1, 2011, for $425,000 plus accrued interest. Prepare all entries required to properly record the sale.
On July 1, 2016. Elm Company purchased cash eight P 1,000 , 9%
bonds of Celebrity Corporation at P 100 plus accrued interest.
The bond interest is paid semiannually each May 1 and November 1.
The bond maturity date is November 1, 2017. Elm Company's annual
reproting period ends December 31. Elm Company classifies this
investment as trading security. At December 31, 2016 , Celebrity bonds
were quoted at P 97.
REQUIRED :
a. Give tne entry for Elm Company to record the purchase of the bonds
on July 1, 2016
b. Give the entry to record the interest collected during 2016.
Chapter 13 Solutions
Intermediate Accounting: Reporting and Analysis, 2017 Update
Ch. 13 - Prob. 1GICh. 13 - Provide brief definitions for the following terms:...Ch. 13 - Prob. 3GICh. 13 - Prob. 4GICh. 13 - Prob. 5GICh. 13 - Briefly summarize the accounting for an investment...Ch. 13 - Prob. 7GICh. 13 - Prob. 8GICh. 13 - Prob. 9GICh. 13 - Prob. 10GI
Ch. 13 - Prob. 11GICh. 13 - Prob. 12GICh. 13 - Prob. 13GICh. 13 - Prob. 14GICh. 13 - Briefly describe how to determine and record the...Ch. 13 - Prob. 16GICh. 13 - Prob. 17GICh. 13 - Prob. 18GICh. 13 - Prob. 19GICh. 13 - How does IFRS categorize minority passive...Ch. 13 - Prob. 21GICh. 13 - Prob. 22GICh. 13 - Prob. 23GICh. 13 - Prob. 24GICh. 13 - Prob. 25GICh. 13 - Prob. 26GICh. 13 - Prob. 27GICh. 13 - What is a fund? Distinguish between a fund and an...Ch. 13 - Prob. 29GICh. 13 - Prob. 30GICh. 13 - On January 1, 2016, Weaver Company purchased as...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Prob. 4MCCh. 13 - Prob. 5MCCh. 13 - Prob. 6MCCh. 13 - A security in a portfolio of available-for-sale...Ch. 13 - Prob. 8MCCh. 13 - Cash dividends declared out of current earnings...Ch. 13 - Prob. 10MCCh. 13 - Prob. 1RECh. 13 - Prob. 2RECh. 13 - Prob. 3RECh. 13 - Prob. 4RECh. 13 - Prob. 5RECh. 13 - Prob. 6RECh. 13 - Prob. 7RECh. 13 - Prob. 8RECh. 13 - Prob. 9RECh. 13 - Prob. 10RECh. 13 - Prob. 11RECh. 13 - Prob. 12RECh. 13 - Prob. 13RECh. 13 - On January 1, Kilgore Inc. accepts a 20,000...Ch. 13 - Prob. 15RECh. 13 - Prob. 16RECh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Prob. 15ECh. 13 - Prob. 16ECh. 13 - Prob. 17ECh. 13 - Prob. 18ECh. 13 - Prob. 19ECh. 13 - Prob. 20ECh. 13 - Prob. 21ECh. 13 - Prob. 22ECh. 13 - Prob. 23ECh. 13 - Prob. 24ECh. 13 - Prob. 25ECh. 13 - Prob. 26ECh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Prob. 6PCh. 13 - Trading Securities 8th State Bank prepares interim...Ch. 13 - Available-for-Sale Securities Holly Company...Ch. 13 - Investments in Equity Securities Noonan...Ch. 13 - Available-for-Sale Investments Manson Incorporated...Ch. 13 - Prob. 11PCh. 13 - Prob. 12PCh. 13 - Prob. 13PCh. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 1CCh. 13 - Investments in Securities Cane Company has two...Ch. 13 - Prob. 3CCh. 13 - Prob. 4CCh. 13 - Available-for-Sale Securities The following are...Ch. 13 - Prob. 6CCh. 13 - Prob. 7CCh. 13 - Prob. 8CCh. 13 - Prob. 9CCh. 13 - Prob. 10C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.arrow_forwardParilo 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_forwardOn January 1, 2018, West Company purchased $600,000 of 6%, 5-year bonds, as an available-for-sale security, with interest payable on July 1 and January 1. The bonds sell for $623,625, which results in a premium of $23,625 and an effective interest of 4%. Instructions: Prepare the journal entry on January 1, 2018.arrow_forward
- On January 1, 2016, Edoras Company purchased $300,000 of ten-year 10% bonds of Combe Company and classified the investment as held-to-maturity. Interest is payable annually. The effective yield on the investment is 8%. What is the balance in Edoras’s investment in held-to-maturity debt securities account (rounded to the nearest dollar, if necessary) at December 31, 2016 assuming that the bonds have a fair value of $335,693 on that date? A) $335,693 B) 340,260 C) 300,000 D) 337,481arrow_forwardOn January 1, 2018, West Company purchased $600,000 of 6%, 5-year bonds, as an available-for-sale security, with interest payable on July 1 and January 1. The bonds sell for $623,625, which results in a premium of $23,625 and an effective interest of 4%. Instructions Prepare the journal entry to record interest revenue on July 1, 2018.arrow_forwardFreddy Corporation purchased $1,500,000, 8%, five year bonds on January 1, 2018. Interest is payable on December 31 of each year. When the bonds were issued the market rate was 10%. Freddy records the following transactions. Round all calculations to the nearest dollar. See attached spreadsheet I. Prepare the journal entry for the purchase of the securities which are classified as Available for Sale securities. Prepare all journal entries required on December 31, 2019. Freddy uses the effective interest amortization method. On December 31, 2019, the fair market value of the bonds was $1,450,000. The fair market value of the bonds on December 31, 2018, was $1,500,000.arrow_forward
- Hey Company' investments in debt and equity securities reveals the following information: a) On January 1, 2018, X Company issued P500,000 in debt securities. The stated interest is 8% with interest payable semiannually, on June 30 and December 31. On February 1, Hey purchased these debt securities from an investor who acquired them when they were originally issued. Galp paid the investor an amount equal to the face value of the securities plus accrued interest. The securities were designated as held-for-trading. b) On June 1, Galp purchased 10,000 shares of equity securities for P32 per share. These securities were designated as financial asset at Fair Value through other comprehensive income. Galp paid P200 broker's commission on the purchase. The entry to record acquisition of debt securities on January 1 is:arrow_forwardOn January 1, 2015, Montock Company purchased as held-to-maturity debt securities $250,000 face value of Stark Corporation's 10% bonds for $325,500. The bonds were purchased to yield 15% interest and pay interest annually. The bonds mature on January 1, 2020. Montock uses the effective interest method of amortization. What amount should Montock report on its December 15, 2015, balance sheet as an investment in held-to-maturity debt securities? A. $394, 325, B. $349,325, C. $320, 550, or D. $57,550.arrow_forwardLance Brothers Enterprises acquired $720,000 of 3% bonds, dated July 1, on July 1, 2018, as a long-term investment. Management has the positive intent and ability to hold the bonds until maturity. The market interest rate(yield) was 4% for bonds of similar risk and maturity. Lance Brothers paid $600,000 for the investment in bondsand will receive interest semiannually on June 30 and December 31. Prepare the journal entries (a) to recordLance Brothers’ investment in the bonds on July 1, 2018, and (b) to record interest on December 31, 2018, at theeffective (market) ratearrow_forward
- On January 1, 2022, Lenore Corp. purchased $400,000 of 6% bonds for $427,750, which they are classifying as available for sale. Interest is payable annually on December 31. The bonds mature on December 31, 2024. Premium or discount amortization is recorded when interest is received by the straight-line method. The market value of the bonds at December 31, 2022 is 424,000. Required: Prepare the entry to record the acquisition on January 1, 2022. Prepare the entry to record the December 31, 2022 interest payment. Prepare the entry to adjust the investment to fair value at December 31, 2022. The bonds are sold on January 1, 2023 for 430,000. Prepare any entries necessary to record the sale.arrow_forwardLance Brothers Enterprises acquired $720,000 of 3% bonds, dated July 1, on July 1, 2016, as a long-term investment. Management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Lance Brothers paid $600,000 for the investment in bonds and will receive interest semiannually on June 30 and December 31. Prepare the journal entries (a) to record Lance Brothers’ investment in the bonds on July 1, 2016, and (b) to record interest on December 31, 2016, at the effective (market) rate.arrow_forwardFalcon Company purchased 10% bonds with a face value of $200,000 at par plus accrued interest on April 1, Year 1. Interest on these bonds is payable June 30 and December 31. Falcon intends to hold the bonds until maturity in Year 3. The entry to record the acquisition of the bonds includes a debit to Investment in Trading Securities for $205,000. debit to Investment in Held-to-Maturity Debt Securities for $205,000. debit to Interest Income for $5,000. debit to Interest Receivable for $5,000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher: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
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License