Explanation Compute the interest earned during the year by Company H on bond investments. Particulars Amount ($) Interest earned on $120,000 bonds from February 1 to July 1 $2,500 Interest earned on $40,000 bonds from July 1 to October 1 500 Interest earned on $80,000 ( $ 120 , 000 – $ 40 , 000 ) from July 1 to December 31 2,000 Total interest earned on bonds during the year $5,000 Table (1) Working Notes: Compute amount of interest received on $120,000 from February 1 to July 1 (5 months). Interest received = { Amount of debt investment × Rate of interest × Time period } = $120,000×5% × 5 12 = $2,500 Compute amount of interest received on $40,000 from July 1 to October 1 (3 months)

27th Edition

ISBN: 9781337272094

Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher: Cengage Learning,

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Question

Chapter 15, Problem 15.5EX

To determine

Bond investment: Bond investments are debt securities which pay a fixed interest revenue to the investor.

To compute: The interest earned during the year by Company H on bond investments

Expert Solution & Answer

Chapter 15 Solutions

Accounting

Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQ Ch. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQ Ch. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ

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REDEMPTION OF BONDS ISSUED AT FACE VALUE Levesque Lumber Co. issued 800,000 in bonds at face value 10 years ago and has paid semiannual interest payments through the years. (a) Assume the bonds are redeemed at face value. (b) Assume that 80,000 of the bonds are redeemed at 104. (c) Assume that 80,000 of the bonds are redeemed at 96. Prepare journal entries to record (a), (b), and (c).
Oak Branch Inc. issued $700,000 of 5%, 10-year bonds when the market rate was 4%. They received $757,243. Interest was paid semi-annually. Prepare an amortization table for the first three years of the bonds.
Haiku Inc. issued $600,000 of 10-year bonds with a stated rate of 11% when the market rate was 12%. The bonds pay interest semi-annually. Prepare the first three years of an amortization schedule. Assume that the bonds were issued for $565,710.

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