Prepare journal entries to record the purchase of the bonds

Reference no: EM131812803

On November 1, 2015, Reid Corporation acquired bonds with a face value of $700,000 for $673,618.61. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2020. On November 1, 2016, in contemplation of a major acquisition, the bonds were sold for $700,000. Reid is on a fiscal year accounting period ending October 31 and uses the effective interest method.

Required: Prepare journal entries to record the purchase of the bonds, the interest receipts on April 30, 2016, and October 31, 2016, and the sale of the bonds.

Reference no: EM131812803

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