On January 1, 2013, Kelly Corporation acquired bonds with a face value of $500,0
ID: 2449567 • Letter: O
Question
On January 1, 2013, Kelly Corporation acquired bonds with a face value of $500,000 for $483,841.79, a price that yields a 10% effective annual interest rate. The bonds carry a 9% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2016, and are being held to maturity.
1. Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the straight-line method of amortization. If required, round your answers to the nearest cent. For compound entries, if an amount box does not require an entry, leave it blank.
June 30 entry
June 30 entry
Explanation / Answer
Date Title Debit credit jan 1,2013 Bond receivable 500,000 cash 48384179 premium on bond receivable 16158.21 [being bond purchased ] jne30 cash [500000*.09*6/12] 22500 premium on bond payable [16158.21/ 4 = 4039.55*6/12 ] 2019.78 Interest revenue 24519.78 [being first semiannual receipt recorded] 31 dec cash [500000*.09*6/12] 22500 premium on bond payable [16158.21/ 4 = 4039.55 per year *6/12 ] 2019.78 Interest revenue 24519.78 [being first semiannual receipt recorded]
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