00:02
We have to record the sale of one -fourth of the bonds on september 1, 2028.
00:08
So you need to make the necessary accounting entries.
00:11
Since the bond are classified as held to maturity and straight line amortization is used, you should account for the acquired interest as well.
00:21
So here's how to record the sale.
00:23
First, we need to calculate the amortized cost of bond as of december 31, 2016.
00:30
So original cost of bonds is equal to $56 ,920.
00:43
Remaining life of bond is equal to 9 years, 20 years subtracted from 11 years.
00:59
Then annual amortization is equal to original cost divided by remaining life.
01:23
The value of $56 ,920 divided by 9 is equal to we get $6 ,324 per year.
01:37
Now next we need to calculate the acquired interest up to september 1, 2018.
01:43
So acquired interest is equal to annual amortization multiplied by 8 years.
01:59
From december 31, 2017 to september 1, 2018, which is equal to putting the value $6 ,324 multiplied by 8 is equal to we get $50 ,592.
02:22
Next, we need to calculate the carrying value of the bonds as of september 1, 2018.
02:28
So carrying value of bonds is equal to original cost subtracted from acquired interest, which is equal to putting the value $56 ,920 subtracted from $50 ,592.
02:59
Evaluating it, we get $6 ,328...