Question 2

On December 31, 20x0, you purchase $200,000 of the bonds of Underwood Inc. The bonds mature on December 31, 20x15, pay interest of 3% and were purchased to yield 2.6%. Transaction costs of $3,500 were incurred. Coupon payments are received every June 30 and Dec 31. At December 31, 20x1 the bonds were yielding 2.3% and at December 31, 20x2 were yielding 2.8%.

Required Prepare all journal entries for 20x0, 20x1 and 20x2 assuming that the bonds are classified as

a. Amortized Cost

b. FVTOCI