Ex. 17-105—Investment in debt securities at premium.

On April 1, 2007, Sean Co. purchased $160,000 of 6% bonds for $166,300 plus accrued interest as an available-for-sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2012.

Instructions

(a)Prepare the journal entry on April 1, 2007.

(b)The bonds are sold on November 1, 2008 at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method (by months and round to the nearest dollar). Prepare all entries required to properly record the sale.

Ex. 17-106—Investment in debt securities at a discount.

On May 1, 2007, Gipson 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, 2013. 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.)

Instructions

(a)Prepare the entry for May 1, 2007.

(b)The bonds are sold on August 1, 2008 for $425,000 plus accrued interest. Prepare all entries required to properly record the sale.

 

 

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