Journal entry at date of bond purchase

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On January 1, 2009, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2009, and mature on January 1, 2014, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the available-for-sale category.

The fair value of the bonds at December 31 of each year-end is as follows:

2009 $534,200

2010 $515,000

2011 $513,000

2012 $517,000

2013 $500,000

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

Reference no: EM13150241

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