Fitzgerald Inc. issued $750,000 of 8-year, 11% notes payable dated April 1, 2009. Interest on the notes

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Fitzgerald Inc. issued $750,000 of 8-year, 11% notes payable dated April 1, 2009. Interest on the notes is payable semiannually on April 1 and October 1. The notes were sold on April 1, 2009, to an underwriter for $720,000 net of issuance costs. The notes were then offered for sale by the underwriter, and on July 1, 2009, L. Baum purchased the entire issue as a long-term investment. Baum paid 101 plus accrued interest for the notes. On June 1, 2012, Baum sold the investment in Fitzgerald notes to J. Gott as a short-term investment. Gott paid 96 plus accrued interest for the notes as well as $1,500 for brokerage fees. Baum paid $1,000 brokerage fees to sell the notes. Gott held the investment until April 1, 2013, when the notes were called at 104 by Fitzgerald.
Instructions: Prepare all journal entries required on the books of Fitzgerald Inc. for 2009 and 2013, on the books of Baum for 2009 and 2012, and on the books of Gott for 2012 and 2013. Assume that each entity uses the calendar year for reporting purposes and that issue costs are netted against the note proceeds by Fitzgerald. Any required amortization is made using the straight-line method. Ignore any potential impact of year to year market value changes on the accounting for the notes by the investors.
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Intermediate Accounting

ISBN: 978-0538479738

18th edition

Authors: Earl K. Stice, James D. Stice

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