Question

2134 Bond 13.2 pany's bon issue on December 31, 2021. the purchase of the bonds, each interest receipt, and the retirement of the LEVEL TOMS Tred to separately record the interest atacuisition in the company stancial statements (no calculations are required) interest at acquisition, explain the errors that would Bond Investment Premium Amorti amortization Schedule Mercer Corporation acquired $400,000 olan pany's bonds on June 30, 2019, for $409 2019. for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semi-annually on u s and December 31. The annrenriate market interest rate is June 30, 2022 Required: 1. Prepare an investment interest income and premium amortization schedule, using the a. straight-line method b. effective interest method 2. Prepare journal entries to record the December 31, 2019, and December 31, 2021, interest receipts using both methods. Discount Amortization on Bond Investment and Partial Sale of Investment Using Effective Interest Method On January 1, 2019, Mark Corporation purchased bonds with a face value of $500,000 for $475413.60 The bonds are due December 31, 2021, carry a 10% stated rate, and were purchased to yield 12%. Interest is a able semiannually on June 30 and December 31. On January 1, 2021, in contemplation of a major acquisition, one-ourth of the bonds were sold for $127,000. The remainder were held until maturity. 2.5 73.2 Required: Prepare journal entries to record the purchase of the bonds, each interest payment, the partial sale of the invest ment on January 1, 2021, and the retirement of the bond issue on December 31, 2021 -6 Trading Securities Akers Company invests its excess cash in marketable securities. At the beginning of 2019, 5.3 had the following portfolio of investments in trading debt secunnies 12/31/18 Par Value Amortized Cost Fair Value $10,000 $8,400 59.400 Ivan Company 5% bonds maturing on Dec 31, 2028 $40,000 $43,200 $41,800 nylor Company 6% bonds maturing on Dec. 31. 2023 551 600 551200 Security

13-5

Answer 1

	Q- 13.5		Full figures			Rounded off figures				Amortization table bond
	Date	Account titles and Explanation	Debit	Credit		Debit	Credit		Preiod	Opening value	Interest income	Cash inflow	Closing value
	01-Jan-19	Investment in bonds	$475,414.60			$475,415			30-Jun-19	$475,414.6	$28,524.88	25000	$478,939.48
		Cash		$475,414.60			$475,415		31-Dec-19	$478,939.48	$28,736.37	25000	$482,675.84
		(bonds purchased)							30-Jun-20	$482,675.84	$28,960.55	25000	$486,636.40
									31-Dec-20	$486,636.40	$29,198.18	25000	$490,834.58
	30-Jun-19	Cash	$25,000.00			$25,000			30-Jun-21	$490,834.58	$29,450.07	25000	$495,284.65
		Investment in bonds	$3,524.88			$3,525			31-Dec-21	$495,284.65	$29,715.35	525000	$0.00
		Interest income		$28,524.88			$28,525
		(Interest income receognised)
	31-Dec-19	Cash	$25,000.00			$25,000
		Investment in bonds	$3,736.37			$3,736
		Interest income		$28,736.37			$28,736
		(interest income booked)
	30-Jun-20	Cash	$25,000.00			$25,000
		Investment in bonds	$3,960.55			$3,961
		Interest income		$28,960.55			$28,961
		(Interest income receognised)
	31-Dec-20	Cash	$25,000.00			$25,000
		Investment in bonds	$4,198.18			$4,198
		Interest income		$29,198.18			$29,198
		(interest income booked)
	01-Jan-21	Cash	$127,000.00			$127,000
		Gain on sale of bonds		$4,291.36			$4,291
		Investment in bonds(490,834.58/4)		$122,708.64			$122,709
	30-Jun-21	Cash(25000/4*3)	$18,750.00			$18,750
		Investment in bonds	$3,337.56			$3,338
		Interest income(29450/4*3)		$22,087.56			$22,088
		(Interest income receognised)
	31-Dec-21	Cash(25000/4*3)	$18,750.00			$18,750
		Investment in bonds	$3,536.51			$3,537
		Interest income(29715/4*3)		$22,286.51			$22,287
		(interest income booked)
	31-Dec-21	Cash	$375,000.00			$375,000
		Investment in bonds		$375,000.00			$375,000
		(Bond redeemed)

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