Business, 29.10.2021 15:40, StupidFatChipmunk
On January 1, 2020, Bonita Company purchased $360,000, 8% bonds of Aguirre Co. for $332,201. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Bonita Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Bonita Company sold the bonds for $333,764 after receiving interest to meet its liquidity needs.
1. Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale.
2. Prepare the journal entries to record the semiannual interest on (1) July 1, 2020, and (2) December 31, 2020.
3. If the fair value of Aguirre bonds is $335,764 on December 31, 2021, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31, 2020, is a debit of $3,142.)
4. Prepare the journal entry to record the sale of the bonds on January 1, 2022.
Answers: 2
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On January 1, 2020, Bonita Company purchased $360,000, 8% bonds of Aguirre Co. for $332,201. The bon...
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