Question
On Jan 1, 2022 Northern Corporation acquired as a long term investment $300 million of 5% bonds, dated Jan 1. Northerns intent is to hold
On Jan 1, 2022 Northern Corporation acquired as a long term investment $300 million of 5% bonds, dated Jan 1. Northerns intent is to hold the bonds until maturity. The market interest rate for bonds of similar risk and maturity was 6%. Northern paid $280 million for the bonds. The company will receive interest semi-annually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds on June 30, 2022 was $290,000.
Question #4
Prepare the journal entry to record Northerns investment in the bonds on Jan. 1 2022.
Question #5
Prepare the journal entry that Northern should enter to record the interest on June 30, 2022 at the effective (market) rate.
Question #6
If an unexpected change in Northerns operations forced them to sell the bonds for $270 million on July 1, 2022, prepare the journal entry to record the sale
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