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Present Value of Principal (8,000,000 X 0.6756) 5,404,800 Jan-01 Present Value of Semi Annual Interest (400,000 X 8.11) 3,244,000 Purchase Price 8,648,800 Jul-01

Jest Company purchased $8 million in bonds at a discount, paying $8,648,800. Over the 6 month period from January to June, interest income of $400,000 was received and $54,048 of the premium was amortized, reducing the carrying amount to $8,594,752. From July to December, further interest income of $400,000 was received and $56,210 of the remaining premium was amortized, leaving the carrying amount at year end as $8,538,542.

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132 views

Present Value of Principal (8,000,000 X 0.6756) 5,404,800 Jan-01 Present Value of Semi Annual Interest (400,000 X 8.11) 3,244,000 Purchase Price 8,648,800 Jul-01

Jest Company purchased $8 million in bonds at a discount, paying $8,648,800. Over the 6 month period from January to June, interest income of $400,000 was received and $54,048 of the premium was amortized, reducing the carrying amount to $8,594,752. From July to December, further interest income of $400,000 was received and $56,210 of the remaining premium was amortized, leaving the carrying amount at year end as $8,538,542.

Uploaded by

Anonn
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Jest Company

Required a Required b

Present value of principal (8,000,000 x 0.6756) 5,404,800 Jan-01


Present value of semi annual interest (400,000 x 8.11) 3,244,000
Purchase price 8,648,800
Jul-01

Dec-31

31
Required b Debit Credit

Investment in bonds 8,648,800


Cash 8,648,800

Cash 400,000
Interest income 400,000

Interest income 54,048


Investment in bonds 54,048

Interest received 400,000


Interest income (8,648,800 x 8% x 6/12) 345,952
Premium amortization 54,048

Accrued interest receivable 400,000


Interest income 400,000

Interes Interest income 56,210


Investment in bonds 56,210

Interest accrued 400,000


Interest income (8,594,752 x 8% x 6/12) 343,700
Premium amortization 56,210

Acquisition cost January 1 8,648,800


Premium amortization from January 1 to June 30 -54,048
Carrying amount - June 30 8,594,752
Premium amortization from July I to December 31 -56,210
Carrying amount December 31 8,538 542

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