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7)  ABC Company purchased $1,200,000 of 7%, 5-year bonds from XYZ, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 6%, and were held as available for sale. Record the entry to purchase the bonds.         2. Prepare the following schedule for the first two periods using the effective interest method of     amortization.    Date     Cash rec’d      Interest rev   Premium amortization       Carrying value 1/1/21                                                                                         1,249,896 7/1/21    1/1/22

7)  ABC Company purchased $1,200,000 of 7%, 5-year bonds from XYZ, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 6%, and were held as available for sale. Record the entry to purchase the bonds.         2. Prepare the following schedule for the first two periods using the effective interest method of     amortization.    Date     Cash rec’d      Interest rev   Premium amortization       Carrying value 1/1/21                                                                                         1,249,896 7/1/21    1/1/22

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1MC
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7) 

ABC Company purchased $1,200,000 of 7%, 5-year bonds from XYZ, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 6%, and were held as available for sale.

  1. Record the entry to purchase the bonds.

 

 

 

 

2. Prepare the following schedule for the first two periods using the effective interest method of

    amortization. 

 

Date     Cash rec’d      Interest rev   Premium amortization       Carrying value

1/1/21                                                                                         1,249,896

7/1/21   

1/1/22    

 

 

      

1. At 12/31/21, the bonds had a fair value of $1,250,000. Prepare the journal entry for the fair

    value adjustment.

 

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