Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization.
1. Garfield Company purchased, as a held-to-maturity investment, $94,800 of the 9%, 6-year bonds of Chester Corporation for $86,779, which provides an 11% return.
Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)
2. Garfield Company purchased, as an available-for-sale security, $94,800 of the 9%, 7-year bonds of Chester Corporation for $85,865, which provides an 11% return.
Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in
the Fair Value Adjustment account.) The bonds have a year-end fair value of $90,060. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)
3. Cleveland Company has a stock portfolio valued at $4,580 (available-for-sale). Its cost was $3,930. If the Fair Value Adjustment account has a debit balance of $287, prepare the journal entry at year-end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)
4. On January 1, 2013, Phantom Company acquires $327,200 of Spiderman Products, Inc., 8% bonds at a price of $310,926. The interest is payable each December 31, and the bonds mature December 31, 2015. The investment will provide Phantom Company a 10.00% yield. The bonds are classified as held-to-maturity. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight- line method. (Round to nearest dollar.) b) Prepare a3-year schedule of interest revenue and bond discount amortization, applying the effective- interest method. (Round to nearest cent.) c) Prepare the journal entry for the interest receipt of December31,2013, and the discount amortization under the straight-line method
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