Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2020, Whispering Winds Limited paid $575,560.90 for 12% bonds with a maturity value of $535,000.00. The bonds provide the bondholders with a

On January 1, 2020, Whispering Winds Limited paid $575,560.90 for 12% bonds with a maturity value of $535,000.00. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature on January 1, 2020, with interest receivable on December 31 of each year. Whispering Winds applies ASPE using the effective interest method, and has a December 31 year end. Assume that Whispering Winds hopes to make a gain on the bonds as interest rates are expected to fall. Whispering Winds accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and reports interest income. The fair value of the bonds at December 31 of each year end is as follows:

2020 $571,600

2021 $551, 050

2022 $548,910

2023 $542,490

2024 $535,000

Prepare the journal entry at the date of the bond purchase.

Prepare the journal entries to record interest income and interest received and recognition of fair value as December 31, 2020, 2021, and 2022.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions