On January 1, 2020, Sharp Company purchased ($ 50,000) of Sox Company (5 %) bonds, at a
Question:
On January 1, 2020, Sharp Company purchased \(\$ 50,000\) of Sox Company \(5 \%\) bonds, at a time when the market rate was \(6 \%\). The bonds mature on December 31, 2024, and pay interest semiannually on June 30 and December 31.
Sharp plans to and has the ability to hold the bonds until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At June 30, 2020, the bonds are quoted at 98.
a. Prepare the entry for the purchase of the debt investment on January \(1,2020\).
b. Prepare the entry for the receipt of interest on June \(30,2020\).
c. Record the entry to adjust the investment to fair value on June 30,2020 , if applicable.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781618533135
2nd Edition
Authors: Hanlon, Hodder, Nelson, Roulstone, Dragoo