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On January 1, Sharp Company purchased $100,000 of Sox Company 6% bonds, at a time when the market rate was 5%. The bonds mature on
On January 1, Sharp Company purchased $100,000 of Sox Company 6% bonds, at a time when the market rate was 5%. The bonds mature on December 31 in five years, and pay interest annually on December 31. Sharp does not intend to trade the bond or to hold them until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At December 31, the bonds are quoted at 98.
Record the entry to adjust the investment to fair value on December 31, if applicable.
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