Question
a.Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/10 12/31/11 12/31/12
a.Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale.
12/31/10 12/31/11 12/31/12
Amortized cost $185,500 $193,300 $200,000
Fair value $181,000 $196,000 $200,000
Required:
ii.Indicate, with a reason, whether the bonds were purchased at a discount or a premium.
iii.Prepare the adjusting entry to record the bonds at fair value at December 31, 2010. The Securities Fair Value Adjustment account has a debit balance of $4,000 prior to adjustment.
iv.Prepare the adjusting entry to record the bonds at fair value at December 31, 2011.
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