Question

Rockfish Company purchased a 5-year, $ 200,000 bond with a 5% interest rate and a 6%...

Rockfish Company purchased a 5-year, $ 200,000 bond with a 5% interest rate and a 6% yield on December 31, 2018. The coupon is received annually on December 31 starting with December 31, 2019. The fair value of the bond is presented below:

12/31/19 $ 194,500

12/31/20 $ 194,200

12/31/21 $ 195,650

Required:

(a) Prepare the journal entry for the purchase of these bonds on 12/31/2018. Assume that the bonds are classified as held-to-maturity. What would the entry be if they were classified as available-for-sale?

(b) What would the entry(ies) be for the held-to- maturity bond in the year 2021? You may want to prepare an amortization schedule for this.

(c) If it was categorized as an available-for-sale bond, what would the entry(ies) be in 2021?

(d) How would the entries change if these were trading securities?

Homework Answers

Answer #1

Solution-

Requirement date particulars debit $ credit $
a) 12/31/2018

Held to maturity securities

cash

200,000 200,000
b) 12/31/2021

cash

interest revenue

held for maturity securites

10,000

2,000

12000
C) 12/31/2020

available for sale of securities

cash

200,000 200,000
12/31/2021

cash

available for sale

interest revenue

10,000

2,000

12,000
12/31/12

unrealized holding gain or loss

securities fair value

6000 6000

D) The entries will remain same just the trading word will come.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2018, Hoosier Company purchased $944,000 of 10% bonds at face value. The bond...
On January 1, 2018, Hoosier Company purchased $944,000 of 10% bonds at face value. The bond market value was $987,000 on December 31, 2018. Required: Prepare the appropriate journal entry on December 31, 2018, to properly value the bonds assuming the bonds are classified as: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Trading securities. Securities available for sale. Held-to-maturity securities. Record the unrealized holding gain or loss for trading...
On January 1, 2018, Hoosier Company purchased $930,000 of 10% bonds at face value. The bond...
On January 1, 2018, Hoosier Company purchased $930,000 of 10% bonds at face value. The bond market value was $980,000 on December 31, 2018. Required: Prepare the appropriate journal entry on December 31, 2018, to properly value the bonds assuming the bonds are classified as: (1.) Trading securities. (2.) Securities available for sale. (3.) Held-to-maturity securities.
Presented below is an amortization schedule related to Shamrock Company’s 5-year, $180,000 bond with a 6%...
Presented below is an amortization schedule related to Shamrock Company’s 5-year, $180,000 bond with a 6% interest rate and a 3% yield, purchased on December 31, 2018, for $204,731. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/18 $204,731 12/31/19 $10,800 $6,142 $4,658 200,073 12/31/20 10,800 6,002 4,798 195,275 12/31/21 10,800 5,858 4,942 190,333 12/31/22 10,800 5,710 5,090 185,243 12/31/23 10,800 5,557 5,243 180,000 The following schedule presents a comparison of the amortized cost and fair...
May 17, Purchased 100 Nugent bonds for $800 per bond. July 12, Purchased 40 Alfredo bonds...
May 17, Purchased 100 Nugent bonds for $800 per bond. July 12, Purchased 40 Alfredo bonds at $600 per bond, plus a $600 brokerage commission. Largent accounts for these investments as securities available-for-sale. At December 31, 2021, the market values of the securities were as follows: Security Market Value per Bond Nugent $ 720 Alfredo $ 640 Required: 1. Prepare the journal entries to record the acquisition of the two investments. 2. Prepare any necessary adjusting entries assuming the bonds...
Recording Entries for HTM Debt Securities— Effective Interest Method On January 1, 2020, Baker Corp. purchased...
Recording Entries for HTM Debt Securities— Effective Interest Method On January 1, 2020, Baker Corp. purchased $32,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature December 31, 2029. The investment is classified as a held-to-maturity investment because Baker has the intent and the ability to hold the bonds for 10 years. The effective rate on the bonds is 4.5%. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method....
On January 1, 2020, Swifty Company purchased 8% bonds having a maturity value of $280,000, for...
On January 1, 2020, Swifty Company purchased 8% bonds having a maturity value of $280,000, for $303,589.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Swifty 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 a bond...
During 2021, Largent Enterprises purchased bonds as follows: May 17, Purchased 100 Nugent bonds for $800...
During 2021, Largent Enterprises purchased bonds as follows: May 17, Purchased 100 Nugent bonds for $800 per bond. July 12, Purchased 40 Alfredo bonds at $600 per bond, plus a $600 brokerage commission. Largent accounts for these investments as securities available-for-sale. At December 31, 2021, the market values of the securities were as follows: Security Market Value per Bond Nugent $ 720 Alfredo $ 640 Required: 1. Prepare the journal entries to record the acquisition of the two investments. 2....
On January 1,2017, Carla Company purchased 12% bonds, having a maturity value of $278,000 for $299,076.51....
On January 1,2017, Carla Company purchased 12% bonds, having a maturity value of $278,000 for $299,076.51. The bonds provide the bond holders with a 10% yield. They are dated January 1,2017 and mature January 1,3022, with interest received on January 1 of each year. Carla Company uses the effective interest method to allocate unamortized discount or premium. The bonds are classified as available for sale category. The fair value of the bonds at December 31 of each year end is...
Problem 17-4 Presented below is information taken from a bond investment amortization schedule with related fair...
Problem 17-4 Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/17 12/31/18 12/31/19 Amortized cost $537,100 $468,700 $591,700 Fair value $542,600 $457,900 $591,700 (a) Indicate whether the bonds were purchased at a discount or at a premium. (b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2017. The Fair Value Adjustment account has a debit balance of $1,000 prior to...
Exercise 12-1 (Algo) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1] Tanner-UNF Corporation acquired as a...
Exercise 12-1 (Algo) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1] Tanner-UNF Corporation acquired as a long-term investment $310 million of 6.0% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $280.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT