Question
On January 1, 2013, Hi and Lois Company purchased 14% bonds, having a maturity value of $515,900, for $573,100.93. The bonds provide the bondholders with
On January 1, 2013, Hi and Lois Company purchased 14% bonds, having a maturity value of $515,900, for $573,100.93. The bonds provide the bondholders with a 11% 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 $569,371 2016 $519,700 2014 $516,900 2017 $515,900 2015 $514,700
Prepare the journal entries to record the interest received and recognition of fair value for 2013.
Prepare the journal entry to record the recognition of fair value for 2014.
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