Question
On 1/1/2009 ABC, Inc. purchases a 5-year $1,000,000, 6% bond requiring semiannual interest payments from XYZ, Inc. Interest payments are scheduled to occur on 6/30
On 1/1/2009 ABC, Inc. purchases a 5-year $1,000,000, 6% bond requiring semiannual interest payments from XYZ, Inc. Interest payments are scheduled to occur on 6/30 and 12/31 each year. They classify this investment as "Trading". ABC, Inc. pays an amount for the bond that creates an effective yield of 5%.
Assuming that ABC, Inc. prepares its financial statements (balance sheet, income statement, etc.) on 12/31 each year, and further that the market value of the XYZ, Inc. bonds is $980,000 on 12/31/2009, what are the journal entries necessary on 12/31/2009?
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