HW – Ch.17
Q1) On January 1, 2006, Hummer Company purchased 5% bonds, having a maturity value of $500,000,
for $428,937.98. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2006,
and mature January 1, 2016, with interest receivable June 30 and December 31 of each year. Hummer
Company uses the effective-interest method to allocate unamortized
discount or premium. The bonds are classified in the held-to-maturity category.
Prepare the journal entry at the date of the bond purchase.
Prepare the first 3 years of a bond amortization schedule.
Prepare the journal entry to record the interest received and the amortization for 2006.
Q2) At December 31, 2006, the available-for-sale equity portfolio for Zorro Foods Corp. is as follows.
December 31, 2005, securities fair value adjustment balance—Dr. 5,400
On January 20, 2007, Zorro sold Apple for $31,100. The sale proceeds are net of brokerage fees.