Exercise 17-2 On January 1, 2013, Dagwood Company purchased at par 12% bonds hav

Question

Exercise 17-2

On January 1, 2013, Dagwood Company purchased at par 12% bonds having a maturity value of $316,800. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a)

(b)

(c)

(a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entry to record the interest received for 2013. (c) Prepare the journal entry to record the interest received for 2014.

Explanation / Answer

jan 1 2013 bond a/c...........dr $179761

to cash $179761

dec 31 2013 cash a/c.................dr $21571

to interest $21571

dec 31 2014 cash a/c............dr $24159

to interest $24159

note value of bond

179761(after deducting each year interest in the way (316800/112)*100 in the same way

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