A Company Paid $600,000 for 10% Bonds with a Par

question 114

Essay

A company paid $600,000 for 10% bonds with a par value of $600,000 on September 1. The bonds pay 5% interest semiannually on September 1 and March 1. The company intends to hold the bonds until they mature. Prepare the journal entries for the following dates and transactions related to this bond acquisition.
(1) Bonds purchased on September 1.
(2) Year-end adjusting entry, December 31.
(3) Receipt of semiannual interest March 1.
(4) Redemption of the bonds at maturity on August 31.

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Definitions:

Cost-Volume-Profit Analysis

A financial analysis tool used to determine how changes in costs and volume affect a company's operating income and net income.

Future Costs

Expected or projected expenses that will be incurred in the future.

Cost-Volume-Profit Analysis

A management accounting method used to analyze how changes in costs and sales volume affect a company's profit.

Expected Income

This is the amount of revenue or profit an individual or business anticipates earning over a specific period, often used for budgeting and planning purposes.