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Question - On January 01, 2019, ABC Corp. Purchased XYZ Company bonds when the market interest rate was 8%. The XYZ bonds had a $500,000 maturity value, paid 6% interest semi-annually on June 30th and December 31st, and had a five year life. ABC Corp.'s year-end is at December 31.
ABC Corp uses IFRS for reporting purposes, therefore, will be using Effective-Interest Method.
Required -
a) Calculate the price paid by ABC Corp. for the bonds.
b) Prepare the journal entry to record the purchase of the bonds.
c) Complete the table below that shows the interest revenue, carrying value of bonds, using the effective interest rate method.
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