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On January 1, 2013, Hi and Lois Company purchased 12% bonds, having a maturity value of $530,400, for $570,612.17. The bonds provide the bondholders with
On January 1, 2013, Hi and Lois Company purchased 12% bonds, having a maturity value of $530,400, for $570,612.17. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.
2013 | $566,632 | 2016 | $519,900 | |||
2014 | $517,800 | 2017 | $530,400 | |||
2015 | $515,100 |
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(a) | Prepare the journal entry at the date of the bond purchase. | |
(b) | Prepare the journal entries to record the interest received and recognition of fair value for 2013. | |
(c) | Prepare the journal entry to record the recognition of fair value for 2014. |
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