P16-1. Debt Investments, Held to Maturity. Capitol Corporation acquired $6,735,000 par value, 6%, S-year bonds
on their date of issue, January 1 of the cu
ent year. The market rate at the time of issue was 10%, and interest
is paid semiannually on June 30 and December 31. Capitol will use the effective interest rate method to account
for this investment. Capitol intends to hold the investment until the bonds mature, and has the ability to do so.
Required »
. Determine the purchase price of the investment in bonds.
. Prepare the journal entry to record the acquisition of the bond investment.
. Prepare an amortization table for the investment using the effective interest rate method.
. Prepare the journal entry to record the interest income for the first year.
Prepare the journal entry to record the sale of the bonds at the end of the third year for $6,100,000.
po ow
E15-5. Treasury Stock Transactions, Disclosure. The following shareholders’ equity section was taken from the
ooks of Au
y Corporation at the beginning of the cu
ent year:
Common Stock, $10 par value, 1,000,000 shares $ 989,500
authorized, 98,950 shares issued and outstanding
Additional Paid-in Capital in Excess of Par — Common 120,000
Additional Paid-in Capital from Treasury Stock 0
Transactions
Retained Earnings 1,545,000
Required »
a. Prepare the journal entries required to record each of the following events:
Au
y acquired 15,000 shares of common stock to be held in the treasury at a cost of $16 per share.
e Au
y sold 4,800 shares of treasury stock at $19 per share.
o Au
y sold 7,200 shares of treasury stock at $8 per share.
« Au
y reported a net loss of $367,540 for the year.
» The company declared and paid a $2 per share cash dividend at year-end.
. Prepare the shareholders’ equity section at the end of the year.