On January 1, 2012, CASB Incorporated issued $1 million of 10-year, 8% bonds at 102. They were
Question:
On January 1, 2012, CASB Incorporated issued $1 million of 10-year, 8% bonds at 102. They were sold at a premium because the market interest rate was 7.7%. The bonds pay interest semi-annually on June 30 and December 31. On January 1, Densmore Consulting Ltd. purchased $200,000 of CASB bonds at 102 as a trading investment. On July 1, after receiving the bond interest, Densmore Consulting sold its CASB bonds at 103. Both companies have a December 31 year end.
Instructions
(a) Prepare all required entries for Dens more Consulting, the investor, to record the above transactions.
(b) How would the journal entries for Dens more Consulting change if the investment had been purchased with the intent of holding it to maturity?
(c) Prepare all required entries for CASB, the investee, to record the above transactions.
(d) Comment on the differences in recording that you observe between the investor and the investee.
Step by Step Answer:
a Densmore Consulting Trading Jan 1 Trading Investments 204000 Cash 200000 X 102 204000 June 30 Cash 200000 X 8 X 612 8000 Interest Revenue 8000 July ...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
