Question
On January 1, 2018, Earthlight Corp. purchased 5% 6-year bonds with face value of $400,000. The bonds were dated January 1, 2018, and would mature
On January 1, 2018, Earthlight Corp. purchased 5% 6-year bonds with face value of $400,000. The bonds were dated January 1, 2018, and would mature on January 1, 2024. The bonds would pay interest on December 31 of each year. Earthlight paid $361,867 for the bonds to yield 7% (market rate). Earthlight accounted for the bonds at FV-OCI. Earthlights fiscal year end was December 31. Fair values of the bonds on December 31, 2018 and 2019 respectivelywere:
2018 $325,648
2019 $399,408
- Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for each of the six years. (9 marks)
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| Cash Received | Interest Income | Premium/discountamortization | FV-OCI Investment |
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- Prepare all the necessary journal entries at the end of 2018, to record interest income and an adjustment to fair value. (8 marks)
- Prepare all the necessary journal entries at the end of 2019, to record interest income and an adjustment to fair value. (8 marks)
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Construction accounting and financial management
Authors: Steven j. Peterson
2nd Edition
978-0135017111
