Page $7$

Question $14-20$ marks

Bonds

On January $1,2021,$ Ellison Company purchased $12\%$ bonds, having a maturity value of $800,000,$

for $860,652.$ The bonds provide the bondholders with a $10\%$ yield. They are dated January $1,$

$2021,$ and mature January $1,2026,$ with interest receivable December $31$ of each year. Ellison's

business model is to hold these bonds to collect contractual cash flows.

Required:

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

b$.$ Prepare a bond amortisation schedule through $2024.$

c$.$ Prepare the journal ePage $7$

Question $14-20$ marks

Bonds

On January $1,2021,$ Ellison Company purchased $12\%$ bonds, having a maturity value of $800,000,$

for $860,652.$ The bonds provide the bondholders with a $10\%$ yield. They are dated January $1,$

$2021,$ and mature January $1,2026,$ with interest receivable December $31$ of each year. Ellison's

business model is to hold these bonds to collect contractual cash flows.

Required:

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

b$.$ Prepare a bond amortisation schedule through $2024.$

c$.$ Prepare the journal entry to record the interest received and

the amortization for $2021.$

$(3$ marks$)$

the fair value option, assuming the fair value of the bonds is $860,000.$

$(4$ marks$)$

e$.$ Prepare any entries necessary at December $31,2022,$ using the fair

value option, assuming the fair value of the bonds is $840,000.$