Business, 05.05.2020 06:21 lovenot1977
On January 1, 2020, Metlock Company purchased $380,000, 8% bonds of Aguirre Co. for $350,656. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Metlock Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Metlock Company sold the bonds for $352,236 after receiving interest to meet its liquidity needs.
Required:
(a) Determine the purchase price and prepare the journal entry to record the purchase of bonds on January 1, 2017.
(b) Prepare the amortization schedule for the bonds.
(c) Prepare the journal entries to record/accrue the semiannual interest each period.
(d) The fair value of the bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry.
Note that the fair value adjustment balance on December 31, 2017, is a debit of $3,375.
(e ) Prepare the journal entry to record the sale of the bonds on January 1, 2019.
Answers: 1
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On January 1, 2020, Metlock Company purchased $380,000, 8% bonds of Aguirre Co. for $350,656. The bo...
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