Reference no: EM132601992

On September 1, Sarasota Ltd. purchased $77,400 of five-year, 6% bonds for $62,815, resulting in an effective (yield) rate of 11%. The bonds pay interest each March 1 and September 1. Sarasota Ltd. applies ASPE, accounts for the investment under the amortized cost approach using the effective interest accounting policy, and has a December 31 year end. The following March 1, after receiving the semi-annual interest on the bonds, Sarasota sells the bonds for $65,315.

Question (a) Prepare Sarasota's journal entry for the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Question (b) Prepare Sarasota's journal entry for any adjusting entry needed at December 31. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Question (c) Prepare Sarasota's journal entry for the receipt of interest on March 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Question (d) Prepare Sarasota's journal entry for the sale of the bond investment on March 1. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)