Accounting for bonds held to maturity. Kelly Company acquired $500.000 face value of the outstanding bonds of

Question:

Accounting for bonds held to maturity. Kelly Company acquired $500.000 face value of the outstanding bonds of Steedly Company on January 1 2008. The bonds pay interest semiannually on June 30 and December 31 at an annual rate of 7% and mature on December 31, 2010. The bonds were priced on the market on January 1, 2008, to yield 6% compounded semiannually. Kelly Company classifies these bonds as held to maturity.

a. Compute the amount that Kelly Company paid for these bonds, excluding commissions and taxes.

b. Prepare an amortization table for these bonds similar to that in Exhibit 12.2.

c. Give the journal entries that Kelly Company would make to account for these bonds during 2008.

d. Give the journal entries that Kelly Company would make to account for these bonds on December 31. 2010.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...