The following information relates to the debt securities investments of Kiran Co
ID: 2417270 • Letter: T
Question
The following information relates to the debt securities investments of Kiran Company during 2016.
January 1: The company purchased 9% bonds of Tempe Co. having a par value of $150,000 at 101 plus accrued interest. Interest is payable March 1 and September 1. Maturity date is 9/1/17.
March 1: Semiannual interest is received and amortization is updated.
July1: 8% bonds of Flagstaff were purchased. The bonds had a par value of $72,000 and were purchased at 97 plus accrued interest. Interest dates are May 1 and November 1. Maturity date is 11/1/17.
September 1: Semiannual interest is received and amortization updated for the Tempe bonds.
November 1: Semiannual interest is received and amortization updated for the Flagstaff bonds.
December 31: Interest is accrued and amortization updated for both sets of bonds.
REQUIRED:
Prepare journal entries for all dates. Present journal entries for the Tempe bonds, then journal entries for the Flagstaff bonds. No explanations or supporting computations are required. Use straight-line amortization. Round all final computations to the nearest dollar. Organize your journal entries using the format below:
Date Tempe Journal Entries Flagstaff Journal Entries
01/01/16 X
03/01/16 X
07/01/16 X
09/01/16 X
11/01/16 X
12/31/16 X X
Explanation / Answer
1. Afs-Debt Securities $151,500
Interest revenue $4,500
Cash $156,000
note When the interest is received you will record the full amount as a credit to interest revenue. That will leave a smaller correct credit in the account because you debited interest revenue in the first entry. The interest revenue will then be further adjusted when you amortize the bond premium.
2.DR Cash 10125 CR Interest Receivable 4500 CR Interest Income 5625
You don't indicate the purchase date of the bonds, i.e. the year. To amortize discount, divide total discount by months to maturity, then amortize accordingly
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.