Question

On July 1, 2019, Wolfpack Corporation purchased securities which it intends to buy and sell frequently....

On July 1, 2019, Wolfpack Corporation purchased securities which it intends to buy and sell frequently. These securities consisted of Todd Corporation 10%, 5-year bonds with a face value of $21,000 which were purchased for $19,500. 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.

Required: Prepare the December 31 journal entry to record the receipt of the interest.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Journal entry on December 31 to record the receipt of interest =

Particulars Debit Credit

Cash account $1050

Investment in trading securities $150

Interest $1200

Note -

Cash Received =

Face value of security × interest rate × time

= $21000 × 10% × 6/12 months

= $1050

Amortization of discount to interest account =

Face value - purchase price / Number of years

= $21000 - $19500 /5 years

= $1500 / 5 years

= $300

= for 6 months =

$300 × 6/12 months

= $150

Since, amortization of discount is done on straight line basis, $150 will be amortized for 6 months.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52....
On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52. This price implies an 8% yield to Mancunian. The bonds pay interest on December 31 of each year. Mancunian uses the effective-interest method and classifies the bonds as available for sale securities. The fair value of the bonds on December 31, 2019 equals $217,200. The fair value of the bonds on December 31, 2020 equals $208,340. Prepare the journal entries to: 1. Record the...
On July 1, 2019, the company purchased five $1,000 bonds issued by the City of Miamisburg...
On July 1, 2019, the company purchased five $1,000 bonds issued by the City of Miamisburg School District. These bonds were purchased for $4573. The contract rate on these bonds is 4% with interest payable on 1/1 and 7/1; these bonds mature 7/1/2024. The bonds were sold to yield 6%. It is the intention of management to hold these bonds until they mature. On December 31, 2019, these bonds had a fair value of 94. Prepare all journal entries for...
Cupola Fan Corporation issued 8%, $560,000, 10-year bonds for $534,000 on June 30, 2018. Debt issue...
Cupola Fan Corporation issued 8%, $560,000, 10-year bonds for $534,000 on June 30, 2018. Debt issue costs were $3,100. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $540,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs. Required: Prepare the journal entry to record the issuance of the bonds, the...
Recording Entries for AFS Debt Securities— Effective Interest Method On January 1, 2020, Jules Company purchased...
Recording Entries for AFS Debt Securities— Effective Interest Method On January 1, 2020, Jules Company purchased for cash, $95,000 bonds (nineteen $5,000 bonds) of Android Corporation at a market rate of 6%. The bonds pay 6.5% interest, payable on a semiannual basis each June 30 and December 31, and mature on December 31, 2024. The bonds are classified as available-for-sale securities. The annual reporting period of Jules Company ends December 31. Assume the effective interest method of amortization of any...
On January 1, 2018, Gatrong Corporation purchased 12%, 5-year Fleming Corporation bonds with a face value...
On January 1, 2018, Gatrong Corporation purchased 12%, 5-year Fleming Corporation bonds with a face value of $200,000. It expects to hold these bonds until maturity. The bonds pay interest semiannually on June 30 and December 31. Gatrong paid $215,443, a price that yields a 10% effective annual interest rate. Required: Prepare the journal entry on June 30 for Gatrong to record the first interest receipt, using the effective interest method.
Concord Corporation issues $6060000 face value of bonds at 95 on January 1, 2016. The bonds...
Concord Corporation issues $6060000 face value of bonds at 95 on January 1, 2016. The bonds are dated January 1, 2016, pay interest semiannually at 8% on June 30 and December 31, and mature in 10 years. Straight-line amortization is used for discounts and premiums. On September 1, 2019, $3636000 of the bonds are called at 101 plus accrued interest. What gain or loss would be recognized on the called bonds on September 1, 2019? Entry field with incorrect answer...
On July 1, 2016, Rio Corporation issued bonds with a face value of $100,000 and 12%...
On July 1, 2016, Rio Corporation issued bonds with a face value of $100,000 and 12% interest payable semiannually. The bonds mature on June 30, 2021. The market rate of interest at the time of issuance was 14%. Rio Corporation uses the effective interest method. Calculate the proceeds on the bonds. Record the journal entries for July 1, 2016 and December 31, 2016.
On January 1, 2019, Kelly Corporation acquired bonds with a face value of $700,000 for $677,378.51,...
On January 1, 2019, Kelly Corporation acquired bonds with a face value of $700,000 for $677,378.51, a price that yields a 10% effective annual interest rate. The bonds carry a 9% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2022, and are being held to maturity. Required: Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the: 1. straight-line method of amortization 2....
On January 1, Year 1, Victor Company issued bonds with a $450,000 face value, a stated...
On January 1, Year 1, Victor Company issued bonds with a $450,000 face value, a stated rate of interest of 6%, and a 5-year term to maturity. The bonds sold at 95. Interest is payable in cash on December 31 of each year. Victor uses the straight-line method to amortize bond discounts and premiums. What is the amount of interest expense appearing on the income statement for the year ending December 31, Year 3? Group of answer choices $31,500 $22,500...
Cupola Fan Corporation issued 10%, $540,000, 10-year bonds for $516,000 on June 30, 2018. Debt issue...
Cupola Fan Corporation issued 10%, $540,000, 10-year bonds for $516,000 on June 30, 2018. Debt issue costs were $2,900. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $520,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs. Required: 1. to 4. Prepare the journal entry to record the issuance of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT