Asked by Mariam Jaser on Apr 30, 2024
Verified
Pincher Company purchased 50 Issac Company 12% 10-year $1000 bonds on January 1 2017 for $50000. The bonds pay interest semiannually on January 1. On January 1 2018 after receipt of interest Pincher Company sold 30 of the bonds for $28300.
Instructions
Prepare the journal entries to record the transactions described above.
Bonds Pay Interest
A statement indicating that bond issuers periodically make interest payments to bondholders.
Semiannually
Refers to an event or action that occurs twice a year.
Sold Bonds
The act of a company or government issuing bonds to investors in exchange for capital, representing a long-term borrowing.
- Understand the financial accounting and documentation processes involved in buying equity and debt investments.
- Assess how dividends received and interest accrued on investments influence financial statements and reporting practices.
- Acquire insight into the repercussions of selling aspects of investments, including the assessment of earnings or losses.
Verified Answer
CA
Cayla AndrewsMay 02, 2024
Final Answer :
Jan. 1,2017Debt Investments50,000 Cash 50,000 Dec. 31, 2017Interest Receivable ($50,000×12%) 6,000 Interest Revenue 6,000 Jan. 1, 2018Cash 6,000 Interest Receivable 6,000 Jan 1, 2018 Cash 28,300 Loss On Sale of Debt Investments 1,700 Debt Investments (30/50×50.000)30,000\begin{array}{llr} \text { Jan. 1,2017\quad Debt Investments} &50,000\\\quad\quad\quad\quad\quad\quad \text { Cash } &&50,000\\\\ \text { Dec. 31, 2017\quad Interest Receivable \( (\$ 50,000 \times 12 \%) \) } &6,000\\ \quad\quad\quad\quad\quad\quad\quad\text { Interest Revenue } &&6,000\\\\ \text { Jan. 1, 2018\quad Cash } &6,000\\\quad\quad\quad\quad\quad\quad \text { Interest Receivable } &&6,000\\\\ \text { Jan 1, 2018 \quad Cash } &28,300\\\quad\quad\quad\quad\quad\quad \text { Loss On Sale of Debt Investments } &1,700\\ \quad\quad\quad\quad\quad\quad\text { Debt Investments \( (30 / 50 \times 50.000) \)} &&30,000\\\end{array} Jan. 1,2017Debt Investments Cash Dec. 31, 2017Interest Receivable ($50,000×12%) Interest Revenue Jan. 1, 2018Cash Interest Receivable Jan 1, 2018 Cash Loss On Sale of Debt Investments Debt Investments (30/50×50.000)50,0006,0006,00028,3001,70050,0006,0006,00030,000
Learning Objectives
- Understand the financial accounting and documentation processes involved in buying equity and debt investments.
- Assess how dividends received and interest accrued on investments influence financial statements and reporting practices.
- Acquire insight into the repercussions of selling aspects of investments, including the assessment of earnings or losses.
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