question 1)
On July 1, 2020, Blue Spruce Aggregates Ltd. purchased 5% bonds having a maturity value of $55,000 for $57,014. The bonds provide the bondholders with a 4% yield. The bonds mature four years later, on July 1, 2024, with interest receivable June 30 and December 31 of each year. Blue Spruce uses the effective interest method to allocate unamortized discount or premium. The bonds are accounted for using the FV-OCI model with recycling. Blue Spruce has a calendar year end. The fair value of the bonds at December 31, 2020 and 2021, was $57,017 and $56,205, respectively. Assume fair value adjustments are recorded at year end only. Immediately after collecting interest on December 31, 2021, the bonds were sold for $56,205. Your answer is partially correct. Try again. Prepare the journal entry at the date of the bond purchase. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit July 1, 2020 FV-OCI Investments X CashPrepare a bond amortization schedule to December 31, 2021. (Round answers to 0 decimal places, e.g. 5,275.) Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method Date Cash Received Interest Revenue Premium Amortized Amortized Cost of Bonds July 1, 2020 Dec. 31, 2020 X June 30, 2021 Dec. 31, 2021 x XDate Account Titles and Explanation Debit Credit December 31, 2020 v Cash FV-OCI Investments x Interest Income X (To record collection of interest) FV-OCI Investments X Unrealized Gain or Loss - x (To record fair value adjustment) x June 30, 2021 Cash FV-OCI Investments X X Interest Income (To record collection of interest) X December 31, 2021 v Cash X FV-OCI Investments x Interest Income (To record collection of interest)Your answer is partially correct. Try again. Following the three-step approach, prepare the journal entries for the sale of the bond on December 31, 2021. Include the reclassification of unrealized gains and losses to net income. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit x FV-OCI Investments X x Unrealized Gain or Loss - X (To record fair value adjustment to date of disposal) X cash x FV-OCI Investments (To record disposal of the bond) X Loss on Disposal of Invest Unrealized Gain or Loss (To reclassify accumulated unrealized gains and losses from OCI to net income)
