Business, 17.06.2021 21:50 shoafmckenzie5263
On January I, 2018, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2023. Novotna Company plans to hold the bonds to collect contractual cash flows.
On January I, 2020, after receiving interest, Novotna Company sold the bonds for $370,726 after receiving interest to meet its liquidity needs.
Instructions:
(a) Prepare the journal entry to record the purchase of bonds on January 1, 2018.
(b) Prepare the amortization schedule for the bonds.
(c) Prepare the journal entries to record the semiannual interest on July 1, 2018, and December 31, 2018.
(d) Assume that Novotna elected the fair value option for this investment. If the fair value of Aguirre bonds is $368,000 on December 31, 2018, prepare the necessary adjusting entry.
(e) Prepare the journal entry to record the sale of the bonds on January 1, 2020.
Answers: 3
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On January I, 2018, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bo...
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