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Prepare journal entries to record the purchase of the bonds

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Question - On January 1, 2010, the Wender 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 held-to- maturity. The market interest rate (yield) was 14%. The interests are paid semiannually on June 30 and December 31. The maturity date is December 31, 2019.

However, on January 1, 2012, after receiving interests, Wender sold all the bond investments. The bonds were sold for $225,000. Wender 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, 2010; (2) the necessary adjustments on December 31, 2010; (3) the sale of bond investment on January 1, 2012. Show the necessary calculation (rounded to the nearest dollar).

Reference no: EM133174444

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