On January 1, 2020, Carla Company purchased 11% bonds, having a maturity value of $274,000 for $295,314.87. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Carla Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.
2020 $333,600
2023 $322,000
2021 $320,900
2024 $312,000
2022 $320,000
Required:
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare the journal entries to record the interest revenue and recognition of fair value for 2020.
c. Prepare the journal entry to record the recognition of fair value for 2021.
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On January 1, 2020, Carla Company purchased 11% bonds, having a maturity value of $274,000 for $295,...
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