Question
On January 1, 2020, Ayayai 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, 2020, Ayayai 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, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Ayayai 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.
| 2020 | $331,200 | 2023 | $320,200 | |||
|---|---|---|---|---|---|---|
| 2021 | $319,100 | 2024 | $310,000 | |||
| 2022 | $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 2020. | |
| (c) | Prepare the journal entry to record the recognition of fair value for 2021. |
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Financial Accounting an introduction to concepts, methods and uses
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
13th Edition
978-0538776080, 324651147, 538776080, 9780324651140, 978-0324789003
