On January 1, 2020, 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, 2020, and mature January 1, 2025, with interest received January 1 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 revenue and the amortization for 2020.

d. Prepare the journal entry to record the interest revenue and the amortization for 2021.