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Railroad co is about to issue $800,000 of 10-years bonds paying a 9% rate, which

ID: 2462047 • Letter: R

Question

Railroad co is about to issue $800,000 of 10-years bonds paying a 9% rate, which interest payable semi-annually. The discount rate for such securities is 105. How much can Haden expect to receive for the sale of these bonds? Morten corporation purchased $320,000 of its bonds on june 30, 2012, at 102 and immediately retired them. The carrying value of the bonds on the retirement date as $287,400. The bonds pay annual interest and the interest payment due on june 30, 2012, has been made and recorded McEvoy, Inc., purchased $550,000 of its bonds at 96 on june 30, 2012, and immediately retired them. The carrying value of the bonds on the retirement date was $535,000. The bonds pay annual interest and the interest payment due on june 30,2012, has been made and recorded. Patterson Company had the following transactions pertaining to debt securities held as an investment. Purchased 90,6%, $ 1,000 Marks Company bonds for $90,000 cash plus brokerage fees of $950. Interest is payable semiannually on July 1 and January 1. Received semiannual interest on Marks Company bonds. Sold 45 Marks Company bonds for $46,400 less S500 brokerage fees. Journalize the transactions.

Explanation / Answer

Patterson Company Details Bond Par value                1,000 semi annual interest @3% per bond                    30 Semi annual ineterst for 90 bonds=              2,700 Journal entry Date Account Title Dr $ Cr $ Jan 1. Investment in Bond            90,950 Cash            90,950 ( 90 bonds purchased for $90000 + $950 brokerage) Jul 1. Cash                2,700 Interest Revenue              2,700 ( semi annual ineterst received) Oct 1.   Investment in Bond            45,475 Cash            45,900 Gain on Sale of Investment                    425 ( sale of 45 bonds for $46400 less $500 brokerage)