Please looki at same question but in your question some data is replaced by another.
On May 1, 2018 ABC Corporation purchased $1,500,000 of 12% bonds, interest payable on january 1 and july 1, for $1,406,500 plus accrued interest. The bonds mature on January 1,2024. Amortization is recorded when interest is received by the straight-line method (by months and round to the nearest dollar). (Assume bonds are available for sale)Required:(a) Prepare the entry for May 1, 2018.(b) Complete the Interest Revenue Received and Bond Amortization Schedule.(c) The bonds are sold on November 1,2019 for $1,412,500 plus accrued interest. Prepare all entries required to properly record the sale.
Step-by-step explanation:
Kirmer Corp
Entry for May 1, 2018:
Date
Account Titles and Explanation
Debit
Credit
1-May-18
Available-for-Sale Securities
$1,406,500
Interest Revenue
$60,000
Cash
$1,466,500
(To record purchase of 12% bonds)
Available-for-Sale Securities
$1,375
Interest Revenue
$1,375
(To record inerest expense)
Cash
$15,000
Interest Revenue
$15,000
(To record interest expense on date of sale - August 1, 2018)
)
Cash
$1,412,500
Available for sale- securities
$1,406,500
Gain on sale of securities
$6,000
Amortization = $1,500,000 - $1,406,500 = $93,500
The bond period is for 5 years 8 months = 68 months
Hence monthly interest revenue = $93.500/68 = $$1,375
Interest revenue = 1,500,000 x12% x 1/12 = &18.000