Question
On January 1, 2020, Swifty Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9%
On January 1, 2020, Swifty Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Swifty 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 | $309,400 | 2023 | $299,100 | |||
|---|---|---|---|---|---|---|
| 2021 | $297,900 | 2024 | $289,000 | |||
| 2022 | $296,900 |
| (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
Authors: Robert Libby, Patricia Libby, Frank Hodge
9th edition
290-1259222138, 1259222136, 978-1259222139
