E17-4 On January 1, 2013, Hi and
Lois Company purchased 12% bonds, having a maturity value of $300,000, for
$322,744.44. The bonds provide the bondholders with a 10.00% yield. They
are dated January 1, 2013, and mature January 1, 2018, with interest receivable
December 31 of each year. Hi and Lois 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 as follows.
2013 $320,500 2016 $310,000
2014 $309,000 2017
$300,000
2015 $308,000
(a) Prepare the journal entry at
the date of the bond purchase.
(b) Prepare the journal entries
to record the interest received and recognition of fair value for 2013.
(c) Prepare the journal entry to
record the recognition of fair value for 2014.
(Round answers to 2 decimal
places, e.g. 2,525.25. Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
No. Date Account Titles and
Explanation Debit Credit
(a) Jan. 1, 2013
(b) Dec. 31, 2013
Dec. 31, 2013
(c) Dec. 31, 2014
TUTORIAL PREVIEW
No.
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
(a)
|
Jan. 1, 2013
|
Debt Investments (available-for-sale)
|
322,744.44
| |
Cash
|
322,744.44
|
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