Question
On January 1, 2020, Grouper Company purchased 5% bonds, having a maturity value of $510,000 for $437,517. The bonds provide the bondholders with a 7%
On January 1, 2020, Grouper Company purchased 5% bonds, having a maturity value of $510,000 for $437,517. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2020, and mature January 1, 2027, with interest paid on June 30 and December 31 of each year. Grouper 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 | $439,000 | 2023 | $459,000 | |||
|---|---|---|---|---|---|---|
| 2021 | $434,000 | 2024 | $479,000 | |||
| 2022 | $429,000 |
| (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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Intermediate Accounting IFRS Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
2nd Edition
1118443969, 978-1118443965
