Asked by Christopher Flores on Jul 26, 2024
Verified
On January 1, 2010, Waterson Corp.bought $5, 000 of Voltaire Co.'s 9% ten-year bonds for $5, 300 to yield 8%.The bonds pay interest annually and are classified as held to maturity.
Required:
Using the effective interest method, journalize the receipt of the interest and amortization at December 31, 2011.
Effective Interest Method
An accounting practice used for amortizing a bond premium or discount over the life of the bond in a way that reflects a constant rate of interest.
Held To Maturity
A classification for investment securities that a company has the positive intent and ability to hold until the specified maturity date.
Annually
Occurring once every year.
- Achieve proficiency in the effective interest method for bond investments along with comprehension of interest income recognition and amortization.
Verified Answer
JS
jessie spurginJul 26, 2024
Final Answer :
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0.08′$5,300=$424$450−$424=$26$5,300−$26=$5,2740.08′$5.274=$421.92\begin{array}{ll}0.08 ^\prime \$ 5,300 & =\$ 424 \\\$ 450-\$ 424 & =\$ 26 \\\$ 5,300-\$ 26 & =\$ 5,274 \\0.08 ^\prime \$ 5.274 & =\$ 421.92\end{array}0.08′$5,300$450−$424$5,300−$260.08′$5.274=$424=$26=$5,274=$421.92
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0.08′$5,300=$424$450−$424=$26$5,300−$26=$5,2740.08′$5.274=$421.92\begin{array}{ll}0.08 ^\prime \$ 5,300 & =\$ 424 \\\$ 450-\$ 424 & =\$ 26 \\\$ 5,300-\$ 26 & =\$ 5,274 \\0.08 ^\prime \$ 5.274 & =\$ 421.92\end{array}0.08′$5,300$450−$424$5,300−$260.08′$5.274=$424=$26=$5,274=$421.92
Learning Objectives
- Achieve proficiency in the effective interest method for bond investments along with comprehension of interest income recognition and amortization.