Brief Exercise 17-11

Kingbird Company invests $11,100,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $11,629,000. Interest is paid on January 1.

Prepare journal entries for Kingbird Company to (a) record the transactions related to these bonds in 2017, assuming Kingbird does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Kingbird Company elects the fair value option to account for these bonds.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a)

Jan. 1, 2017

Dec. 31, 2017

Jan. 1, 2017

Dec. 31, 2017

(To record interest revenue)

(To record fair value adjustment)

No.

Date

Account Titles and Explanation

Debit

Credit

(b)

Jan. 1, 2017

Dec. 31, 2017

Jan. 1, 2017

Dec. 31, 2017

(To record interest revenue)

(To record fair value adjustment)