Held-to-Maturity Securities and Amortization of a Discount
On January 1, 2013, Kelly Corporation acquired bonds with a facevalue of $500,000 for $483,841.79, a price that yields a 10%effective annual interest rate. The bonds carry a 9% stated rate ofinterest, pay interest semiannually on June 30 and December 31, aredue December 31, 2016, and are being held to maturity.
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the straight-line method ofamortization. If required, round your answers to the nearest cent.For compound entries, if an amount box does not require an entry,leave it blank.
2013 investment in held-to-maturity debt securities $????? Jan 1 cash $????? June 30 cash $????? investment in held-to-maturity debt securities $????? interest income $????? Dec 31 cash $????? investment in held-to-maturity debt securities $????? interest income $?????
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the effective interest methodof amortization. If required, round your answers to the nearestcent. For compound entries, if an amount box does not require anentry, leave it blank.
2013 investment in held-to-maturity debt securities $????? Jan 1 cash $????? June 30 cash $????? investment in held-to-maturity debt securities $????? interest income $????? Dec 31 cash $????? investment in held-to-maturity debt securities $????? interest income $?????
Held-to-Maturity Securities and Amortization of a Discount
On January 1, 2013, Kelly Corporation acquired bonds with a facevalue of $500,000 for $483,841.79, a price that yields a 10%effective annual interest rate. The bonds carry a 9% stated rate ofinterest, pay interest semiannually on June 30 and December 31, aredue December 31, 2016, and are being held to maturity.
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the straight-line method ofamortization. If required, round your answers to the nearest cent.For compound entries, if an amount box does not require an entry,leave it blank.
| 2013 | investment in held-to-maturity debt securities | $????? | |
| Jan 1 | cash | $????? | |
| June 30 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? | ||
| Dec 31 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? |
Prepare journal entries to record the purchase of the bonds andthe first two interest receipts using the effective interest methodof amortization. If required, round your answers to the nearestcent. For compound entries, if an amount box does not require anentry, leave it blank.
| 2013 | investment in held-to-maturity debt securities | $????? | |
| Jan 1 | cash | $????? | |
| June 30 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? | ||
| Dec 31 | cash | $????? | |
| investment in held-to-maturity debt securities | $????? | ||
| interest income | $????? |
Related questions
Amortization of a Premium on a Debt Security
On January 1, 20Y1, Randy Incorporated purchased $500,000 of20-year, 10% bonds when the market rate of interest was 8%.Interest is to be paid on June 30 and December 31 of each year.
1. Prepare the journal entry to record the purchase of the debtsecurity classified as held to maturity. Calculate present valuesusing the compound interest tables and round to the nearestdollar.
| investment in held to maturity securities | x | |
| cash | x |
2. Prepare the journal entry to record the receipt of the firsttwo interest payments, assuming that Randy accounts for the debtsecurity as held to maturity and uses the effective-interestmethod. When required, round your answers to the nearest dollar. Ifan amount box does not require an entry, leave it blank.
| cash | x | |
| investment inheld to maturity securities | x | |
| interest revenue | x | |
| cash | x | |
| investment in held to maturity securities | x | |
| interest revenue | x |
I need help finding the Xs.
Please show how you got your answers. Thank you!
Presented below is an amortization schedule related to Ivanhoe Companyâs 5-year, $160,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $173,855.
|
| Cash | Interest | Bond Premium | Carrying Amount | ||||
| 12/31/15 | $173,855 | |||||||
| 12/31/16 | $11,200 | $8,693 | $2,507 | 171,348 | ||||
| 12/31/17 | 11,200 | 8,567 | 2,633 | 168,715 | ||||
| 12/31/18 | 11,200 | 8,436 | 2,764 | 165,951 | ||||
| 12/31/19 | 11,200 | 8,298 | 2,902 | 163,049 | ||||
| 12/31/20 | 11,200 | 8,151 | 3,049 | 160,000 |
The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.
| 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | ||||||
| Amortized cost | $171,348 | $168,715 | $165,951 | $163,049 | $160,000 | |||||
| Fair value | $170,800 | $170,900 | $167,800 | $164,100 | $160,000 |
| (a) | Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified as held-to-maturity securities. | |
| (b) | Prepare the journal entry related to the held-to-maturity bonds for 2016. | |
| (c) | Prepare the journal entry related to the held-to-maturity bonds for 2018. | |
| (d) | Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for-sale. | |
| (e) | Prepare the journal entries related to the available-for-sale bonds for 2016. | |
| (f) | Prepare the journal entries related to the available-for-sale bonds for 2018. |
