Question 1 On January 1, 2017, Pharoah Company purchased 9% bonds having a matur
ID: 2552323 • Letter: Q
Question
Question 1
On January 1, 2017, Pharoah Company purchased 9% bonds having a maturity value of $330,000, for $357,062.64. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Pharoah Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Date
Account Titles and Explanation
Debit
Credit
SHOW LIST OF ACCOUNTS
Schedule of Interest Revenue and Bond Premium Amortization
Effective-Interest Method
Date
Cash
Received
Interest
Revenue
Premium
Amortized
Carrying Amount
of Bonds
SHOW LIST OF ACCOUNTS
Date
Account Titles and Explanation
Debit
Credit
SHOW LIST OF ACCOUNTS
Date
Account Titles and Explanation
Debit
Credit
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Question 1
On January 1, 2017, Pharoah Company purchased 9% bonds having a maturity value of $330,000, for $357,062.64. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Pharoah Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Explanation / Answer
SOLUTION
(A)
(B) Schedule of Interest Revenue and Bond Premium Amortization-
(C) Journal Entry
(D) Journal Entry
Date Account titles and Explanation Debit ($) Credit ($) January 1, 2017 Debt Investments (Held-to-Maturity) 357,062.64 Cash 357,062.64 (To record the purchase of bond)Related Questions
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