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Question 4 [23 marks] Part A [7 marks]: On January 1, 2014, the HHI Company paid $223,515 to purchase bonds with a face value
Question 4 [23 marks] Part A [7 marks]: On January 1, 2014, the HHI Company paid $223,515 to purchase bonds with a face value of $250,000. The bonds had a stated interest rate of 12% and were classified as Amortized Cost (AC) investments. The market interest rate (yield) was 14%. The interests are paid semiannually on June 30 and December 31. The maturity date is December 31, 2023. However, on January 1, 2016, after receiving interests, HHI sold all the bond investments. The bonds were sold for $230,000. HHI Company used the effective interest method for the discount or premium amortization on bond investment. Required: Prepare journal entries to record: (1) the purchase of the bonds on January 1, 2014; (2) the necessary adjustments on December 31, 2014; (3) the sale of bond investment on January 1, 2016. Show the necessary calculation (rounded to the nearest dollar).
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