Parent Company issued 10-year, 15% bonds with a par value of $500,000 on January 1, 2020 for $470,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2021, $400,000 of the par value bonds were purchased by Sub Company for $410,000. Sub Company is an 80% subsidiary of the Parent Company. Both companies use straight-line method to amortized bond premiums and discounts. The total amount of constructive loss allocated to the Parent Company is

Parent Company issued 10-year, 15% bonds with a par value of $500,000 on January 1, 2020 for $470,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2021, $400,000 of the par value bonds were purchased by Sub Company for $410,000. Sub Company is an 80% subsidiary of the Parent Company. Both companies use straight-line method to amortized bond premiums and discounts. The total amount of constructive loss allocated to the Parent Company is

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 7MCQ

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Parent Company issued 10-year, 15% bonds with a par value of $500,000 on January 1, 2020 for $470,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2021, $400,000 of the par value bonds were purchased by Sub Company for $410,000. Sub Company is an 80% subsidiary of the Parent Company. Both companies use straight-line method to amortized bond premiums and discounts. The total amount of constructive loss is ___________________________
On January 1, 2020, Pronghorn Company purchased 6% bonds, having a maturity value of $550,000 for $475,253. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2027, with interest paid on June 30 and December 31 of each year. Pronghorn Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2020 2021 2022 (a) (b) (c) $476,000 2023 $496,000 $471,000 $516,000 $466,000 2024 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2020. Prepare the journal entry to record the recognition of fair value for 2021.
Aye Company is authorized to issue P5,000,000 of 6%, 10-year bonds dated July 1, 2021 with interest payments on June 30 and December 31. When the bonds are issued on November 1, 2021, the entity received cash of P5,150,000 including accrued interest. What is the discount or premium from the issuance of the bonds payable?
On January 1, 2025, Pronghorn Company purchased 11% bonds having a maturity value of $312,000 for $336,270.95. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Pronghorn Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $333,900 2026 $320,900 2029 2027 $320,000 2028 $321,800 $312,000 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.
On January 1, 2020, Splish Company purchased 5% bonds, having a maturity value of $ 440,000 for $ 377,465. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2027, with interest paid on June 30 and December 31 of each year. Splish Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2020 $ 378,000 2023 $ 398,000 2021 $373,000 2024 $ 418,000 2022 $ 368,000 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2020. (c) Prepare the journal entry to record the recognition of fair value for 2021. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required,…
On January 1, 2025, Bonita Company purchased 12% bonds having a maturity value of $276.000 for $296,924.88. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Bonita Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows 2025 2026 2027 (D) (b) (c) No. (0) $294.800 2028 $286,100 $285,000 2029 $284,100 (List all debit entries before credit entries. Credit account tities are automatically indented when amount is entered. Do not lodent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 2 decimal places, e.g. 1225.25) Account Titles and Explanation (b) Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record…
On January 1, 2025, Flounder Company purchased 11% bonds having a maturity value of $312,000 for $336,270.95. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Flounder Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $333,900 2028 $320,900 2029 2026 2027 $320,000 $321,800 $312,000 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No…
On January 1, 2025, Buffalo Company purchased 8% bonds having a maturity value of $320,000 for $346,959.62. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Buffalo Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. (a) Prepare the journal entry at the date of the bond purchase. (List debit entry before credit entry. 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 O for the amounts. Round answers to 2 decimal places, e.g. 1,225.25.) Date Account Titles and Explanation Jan. 1, 2025 Debit Credit
On January 1, 2018, OCEANIC Company purchased 12% bonds, having a maturity value of P800,000, for P860,652 including transaction cost of P110,000. The bonds provide the bondholders with a 10% yield, are dated January 1, 2018, and mature January 1, 2023, with interest receivable December 31 of each year. OCEANIC’s business model requires the accounting of the debt investment at Fair Value Through Profit or Loss (FVPL). The bonds are quoted at 108 and 109 at the end of 2018 and 2019 respectively. On April 1, 2020, the bonds were sold at 112 plus accrued interest. At what amount should the debt investment be initially recognized at the time of acquisition?
On January 1, 2025, Bramble Company purchased 11% bonds having a maturity value of $301,000 for $324,415.24. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Bramble Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $322,200 2028 $309,800 2029 $308,900 2026 2027 (a) (b) (c) $310,900 $301,000 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No…
On January 1, 2025, Shamrock Company purchased 12% bonds having a maturity value of $284,000 for $305,531.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Shamrock Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows. 2025 $303,400 2028 $293,200 2026 $292,200 2029 $284,000 $291,200 2027 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No…
On January 1, 2014, Dubai Corporation purchased 12% bonds, having a maturity value of $600,000, for $645,489. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2014, and mature January 1, 2019, with interest receivable December 31 of each year. Dubai Corporation uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Instructions (a) Prepare the journal entry on the date of the bond purchase (b) Prepare a bond amortization schedule. (c) Prepare the journal entry to record the interest received and the amortization for all the years