N1.Account MCK Inc. purchased on January 1, 2021, $600.000. 6% bonds of Aguirre Co. for$536,621. The bonds were purchased to yield 8% interest. Interest is payablesemiannually on June 30 and December 31. The bonds mature on December 31,2027. MCK Inc. uses the effective-interest method to amortize discounts or premiums.MCK considers these Available-for-sale securities, and at 12/31/2021 the fair value ofthe bonds is $541,000. As of this date there was no balance in the Fair ValueAdjustment account. An amortization table for the 2021 interest payments is providedbelow.6/30/21CashInterestReceived Revenue18,000.00 21,464.84 3,464.8412/31/21 18,000.00 21,603.43Amortization21,603.43 3,603.43Provide the journal entry for 01/01/2021CarryingValue536,621540,086543,689

When the issue price of a bond is lower than the face value then, it is called to be issued…

MCK Inc. purchased on January 1, 2021, $600.000. 6% bonds of Aguirre Co. for $536,621. The bonds were purchased to yield 8% interest. Interest is payable semiannually on June 30 and December 31. The bonds mature on December 31 2027. MCK Inc. uses the effective-interest method to amortize discounts or prem MCK considers these Available-for-sale securities, and at 12/31/2021 the fair val the bonds is $541,000. As of this date there was no balance in the Fair Value Adjustment account. An amortization table for the 2021 interest payments is prov below. 6/30/21 Cash Received Interest Revenue 18,000.00 21,464.84 3,464.84 12/31/21 18,000.00 21,603.43 Amortization 21,603.43 3,603.43 Provide the journal entry for 01/01/2021 Carrying Value 536,621 540,086 543,689

MCK Inc. purchased on January 1, 2021, $600.000. 6% bonds of Aguirre Co. for $536,621. The bonds were purchased to yield 8% interest. Interest is payable semiannually on June 30 and December 31. The bonds mature on December 31 2027. MCK Inc. uses the effective-interest method to amortize discounts or prem MCK considers these Available-for-sale securities, and at 12/31/2021 the fair val the bonds is $541,000. As of this date there was no balance in the Fair Value Adjustment account. An amortization table for the 2021 interest payments is prov below. 6/30/21 Cash Received Interest Revenue 18,000.00 21,464.84 3,464.84 12/31/21 18,000.00 21,603.43 Amortization 21,603.43 3,603.43 Provide the journal entry for 01/01/2021 Carrying Value 536,621 540,086 543,689

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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Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
Refer to the information in RE 13-3. Assume that on December 31, 2019, Wolfpack received interest on the Todd Corporation bonds. Wolfpack uses the straight-line method to amortize premiums and discounts. Prepare the December 31 journal entry to record the receipt of the interest. On July 1, 2019, Wolfpack Corporation purchases securities which it intends to buy and sell frequently. These securities consisted of todd Corporation 10%, 5-year bonds with a face value of 20,000 which were purchased for 18,500. Prepare the july 1 journal entry to record the purchase of these trading securities.
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On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?
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MCK Inc. purchased on January 1, 2021, $600,000, 6% bonds of Aguirre Co. for $536,621. The bonds were purchased to yield 8% interest. Interest is payable semiannually on June 30 and December 31. The bonds mature on December 31, 2027. MCK Inc. uses the effective-interest method to amortize discounts or premiums. MCK considers these Available-for-sale securities, and at 12/31/2021 the fair value of the bonds is $541,000. As of this date there was no balance in the Fair Value Adjustment account. An amortization table for the 2021 interest payments is provided below. 6/30/21 Cash Received Interest Revenue Amortization 18,000.00 21,464.84 3.464.84 Provide the journal entry for 06/31/2021 Carrying Value 536,621 540,086 12/31/21 18,000.00 21,603.43 3.603.43 543,689
On May 1, 2021, Bramble Corp. purchased $1,580,000 of 12% bonds, interest payable on January 1 and July 1, for $1,406,500 plus accrued interest. The bonds mature on January 1, 2027. Amortization is recorded when interest is received by the straight-line method. (Assume bonds are available for sale.)
(Available-for-Sale Debt Securities) On January 1, 2017, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Novotna Company uses the effective-interest method to amortize discountor premium. On January 1, 2019, Novotna Company sold the bonds for $370,726 after receiving interest to meet its liquidity needs.Instructions(a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale.(b) Prepare the amortization schedule for the bonds.(c) Prepare the journal entries to record the semiannual interest on July 1, 2017, and December 31, 2017.(d) If the fair value of Aguirre bonds is $372,726 on December 31, 2018, prepare the necessary adjusting entry. (Assume thefair value adjustment balance on December 31, 2017, is a debit of $3,375.)(e) Prepare the journal…
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On January 1, 2025, Culver Company purchased $280,000, 6% bonds of Aguirre Co. for $ 257, 289. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2030. Culver Company uses the effective - interest method to amortize discount or premium. On January 1, 2027, Culver Company sold the bonds for $258,816 after receiving interest to meet its liquidity needs. /25/25 $/26/26 - /27/27/28/28 1/1/297/1/291/1/30 Tatal 1