On January 1, 2019, Roosevelt Company purchased 12% bonds having a maturity value of $500,000 for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2019, and mature January 1, 2024, with interest received December 31 of each year. Roosevelt's business model is to hold these bonds to collect contractual cash flows.
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare a bond amortization schedule.
c. Prepare the journal entry to record the interest received and the amortization for 2019.
d. Prepare the journal entry to record the interest received and the amortization for 2020.