On January 1, 2017, Surge Ltd. issued bonds with a maturity value of $6 million at 104
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(a) What amount did Treasury Ltd. pay for Surge Ltd.'s bonds?
(b) Prepare the journal entry for Treasury Ltd. (investor) on January 1, 2017.
(c) Prepare a bond amortization schedule for Treasury Ltd. for the first four interest periods.
(d) Prepare the journal entries for Treasury Ltd. to record the receipt of interest on July 1, 2017, the accrual of interest on December 31, 2017, and the receipt of interest on January 1, 2018. Show how the bonds and related income statement accounts would be presented in Treasury Ltd.'s financial statements for the year ended December 31, 2017.
(e) Prepare the journal entry for Surge Ltd. (investee) on January 1, 2017.
(f) Prepare the journal entries for Surge Ltd. to record the payment of interest on July 1, 2017; the accrual of interest on December 31, 2017; and the payment of interest on January 1, 2018, assuming the company uses the effective-interest method to amortize any premium or discount.
(g) Show how the bonds and related income statement accounts would be presented in Surge Ltd.'s financial statements for the year ended December 31, 2017.
TAKING IT FURTHER
Did the market interest rate on the bonds increase or decrease between January 1, 2017, and December 31, 2017? Will Treasury Ltd. want the market interest rate on the bonds to increase or decrease if it holds the bonds to earn interest? Explain.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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