Question
On January 1, 2017, Mario Corp. acquired 8%, $100,000 (face value) bonds of Luigi Ltd., to yield 6%. The bonds were dated January 1, 2017,
On January 1, 2017, Mario Corp. acquired 8%, $100,000 (face value) bonds of Luigi Ltd., to yield 6%. The bonds were dated January 1, 2017, and mature on December 31, 2019, with interest payable each January 1. Mario intends to hold the bonds to maturity, and will use the FVNI model and the effective interest method of amortization of bond premium or discount.
Required
Prepare the following entries in Marios books:
a) Acquisition of bonds on January 1, 2017,
b) Year-end adjusting entry at December 31, 2017,
c) Receipt of the first interest payment on January 1, 2018.
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