Question
On January 1, 2017, Dover Company purchased 12% bonds, having a maturity value of $310,000, for $333,502.59. The bonds provide the bondholders with a 10%
On January 1, 2017, Dover Company purchased 12% bonds, having a maturity value of $310,000, for $333,502.59. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Dover 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.
| 2017 | $331,200 | 2020 | $320,200 | |||
|---|---|---|---|---|---|---|
| 2018 | $319,100 | 2021 | $310,000 | |||
| 2019 | $318,000 |
|
| (a) | Prepare the journal entry at the date of the bond purchase. | |
|---|---|---|
| (b) | Prepare the journal entries to record the interest revenue and recognition of fair value for 2017. | |
| (c) | Prepare the journal entry to record the recognition of fair value for 2018. |
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Accounting Principles Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
8th Canadian Edition
978-1119502425
