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ACCT 305 Live Lecture Excel Week 4

ACCT 305 Live Lecture Excel Week 4 - HELDTOMATURITY EXAMPLE...

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HELD-TO-MATURITY EXAMPLE FACTS: On July 1 acquired $1,440,000 of 6% bonds dated July 1 Management has positive intent and ability to hold to maturity Market rate is 8% We paid $1,200,000 for these bonds Interest will be paid semi-annually on June 30 and Dec 31 Sold bonds for $1,150,000 on Jan 1 REQUIRED Prepare journal entries for purchase and first interest payment on Dec 31 SOLUTION To record purchase: Debit Investment in Bonds  1,440,000  Credit Discount on Bonds  240,000  Credit Cash  1,200,000  To record first interest payment on Dec 31: Debit Cash (face amount x 1/2 stated rate)   43,200   (1,440,000 x .03)  Debit Discount on Bonds (difference)  4,800  Credit Interest Revenue  48,000  (1,200,000 x .04) BALANCE SHEET AT DEC 31: Investment in Bonds  1,440,000  Less: discount  (235,200)  (240,000 - 4,800)  Amortized cost  1,204,800  SOLD BONDS FOR $1,150,000: Debit Cash  1,150,000  Debit Discount on Bonds  235,200  Debit Loss on Sale of Investments (to balance)  54,800  Credit Investment in Bonds  1,440,000   1,440,000   1,440,000 
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  • Spring '11
  • charlie
  • Generally Accepted Accounting Principles, $1,440,000, depreciation adjustment, income 123 Co., Debit Investment, Million 123 Co.

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