Reference no: EM131705435
LONG-TERM INVESTMENTS
Insurance companies and pension plans hold large quantities of bond investments. Viking, Inc. purchased $3,900,000 of 4.0% bonds of Sherman, Inc. for 114 on January 1, 2016. These bonds pay interest on January 1 and July 1 each year. They mature on January 1, 2020. At October 31, 2016, the end of the company's fiscal year, the market price of the bonds is 101.
1. Journalize Viking's purchase of the bonds as a long-term investment on January 1, 2016, (to be held to maturity), receipt of cash interest, and amortization of the bond premium at July 1, 2016. The straight-line method (S/L) is appropriate for amortizing the bond investment. Show debits first, then credits.
Record the journal entries for the purchase of the bonds on January 1, 2016.
Record the receipt of cash interest at July 1, 2016.
Record the amortization of the bond premium at July 1, 2016.
2. Journalize Viking's accrual of interest receivable and amortization of premium on October 31, 2016. Round your answer to the nearest whole number. Show debits first, then credits.
Record the accrual of interest receivable on October 31, 2016.
Record the amortization of the bond premium on October 31, 2016.
3. Show all financial statement effects of this long-term bond investment on Viking's Balance Sheet at October 31, 2016 and Income Statement for the year ending October 31, 2016.
1. What amount is the Debit to Held-to-Maturity Investment in Bonds on January 1, 2016?
2. What amount is the Debit to Cash to record the receipt of cash interest at July 1, 2016?
3. What amount is the Debit to Interest Revenue to record the amortization of the bond premium at July 1, 2016?
4. What amount is the Debit to Interest Receivable to record the accrual of interest receivable on October 31, 2016?
5. What amount is the Debit to Interest Revenue to record the amortization of the bond premium on October 31, 2016?
6. What is the amount for Interest Receivable under Current Assets in the Balance Sheet at October 31, 2016?
7. What is the amount for Held-to-Maturity Investment in Bonds under Long-term Assets in the Balance Sheet at October 31, 2016?
8. What is the amount for Interest Revenue under Other Revenues in the Income Statement at October 31, 2016?
Attachment:- Assignment File.rar