Assume the same information as in E17.3 except that Roosevelt has an active trading strategy for these bonds. The fair value of the bonds at December 31 of each year-end is as follows.

Instructions

a. Prepare the journal entry at the date of the bond purchase.

b. Prepare the journal entries to record the interest received and recognition of fair value for 2022.

c. Prepare the journal entry to record the recognition of fair value for 2023.

d. Discuss how the response to (c) will be different assuming Roosevelt has a strategy of held-for-collection and selling.

Data in E17.3

On January 1, 2022, 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, 2022, and mature January 1, 2027, with interest received December 31 of each year. Roosevelt’s business model is to hold these bonds to collect contractual cash flows.

Transcribed Image Text:

2022 $534,2o00 2025 $517,000 2023 $515,0o0 2026 $500,000 2024 $513,00o