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How to make journal entry at the date of the bond purchase

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On January 1, 2020, Sarasota Company purchased 12% bonds, having a maturity value of $310,000 for $333,502.59. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota 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   $331,200          2023      $320,200
2021   $319,100           2024      $310,000
2022     $318,000

Question (a) Prepare the journal entry at the date of the bond purchase.

Question (b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2020.

Question (c) Prepare the journal entry to record the recognition of fair value for 2021.

Reference no: EM132654308

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