17-4
Presented below is information taken from a bond
investment amortization schedule with related fair values provided. These bonds
are classified as available-for-sale.
|
12/31/14 |
12/31/15 |
12/31/16 |
||||
|
Amortized cost |
$492,750 |
$520,110 |
$551,820 |
|||
|
Fair value |
$498,020 |
$510,320 |
$551,820 |
(a) Indicate
whether the bonds were purchased at a discount or at a premium. 
|
(b) |
Prepare the adjusting entry to record the bonds at fair value at |
|
|
(c) |
Prepare the adjusting entry to record the bonds at fair value at |
(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 0 for the amounts.)
|
No. |
Date |
Account Titles and |
Debit |
Credit |
|
(b) |
Dec. 31, 2014 |
|
|
|
|
|
|
|
||
|
(c) |
Dec. 31, 2015 |
|
|
|
|
|
|
|
17-2
On January 1, 2014,
Novotna Company purchased $401,200, 6% bonds of Aguirre Co. for $368,658.
The bonds were purchased to yield 8% interest. Interest is payable
semiannually on July 1 and January 1. The bonds mature on January 1, 2019.
Novotna Company uses the effective-interest method to amortize discount or
premium. On January 1, 2016, Novotna Company sold the bonds for
$370,259 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 0 for the amounts.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
||
|
Jan. 1, 2014 |
|
|
|
||
|
|
|
|
|||
|
(b) |
Prepare the amortization schedule for the bonds. |
||||
|
(c) |
Prepare the journal entries to record the semiannual |
||||
|
(d) |
If the fair value of Aguirre bonds is $372,726 on December |
||||
|
(e) |
Prepare the journal entry to record the sale of the bonds |
||||
