Analyzing and Reporting Financial Statement Effects of Bond Transactions

On January 1, 2016, Trueman Corp. issued $300,000 of 20-year, 11% bonds for $277,431, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.

Required a. Confirm the bond issue price. b. Prepare journal entries to record the bond issuance, semiannual interest payment and discount amortization on June 30, 2016, and semiannual interest payment and discount amortization on December 31, 2016. Use the effective interest rate method. c. Post the journal entries from part b to their respective T-accounts. d. Trueman elected to report these bonds in its financial statements at fair value. On December 31, 2016, these bonds were listed in the bond market at a price of 101 (or 101% of par value). What entry is required to adjust the reported value of these bonds to fair value? e. Prepare a table summarizing the effect of these bonds on earnings for 2016.

Date	Description	Debit	Credit
12/31/2016	Unrealized loss	Answer	Answer
	Fair value adjustment	Answer	Answer

Coupon payments	Answer
Discount amortization	Answer
Total interest expense	Answer
Fair value adjustment	Answer
Total effect on income (deduction)	Answer