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Prepare tables to show the periodic adjustments

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Question - Bray Co. acquired $30,000 of Honey Sales Co.'s 7% bonds, interest payable semiannually, bonds maturing in five years. The bonds were acquired at $32,626, a price to return approximately 5%.

1. Prepare tables to show the periodic adjustments to the investment account and the annual bond earnings, assuming adjustment by each of the following methods: (a) the straight line method and (b) the effective interest method.

2. Assuming the use of the effective interest method prepare journal entries for each company for the first year.

Reference no: EM131988556

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