Prepare the journal entries for the receipt of interest

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Question - Simpson Ltd. purchased 8%, $ 100,000 (par value) bonds for $ 108,530 on January 1, 2020. The bonds were purchased to yield 6%. Interest is paid on July 1 and January 1 and the bonds mature on January 1, 2025. Simpson uses the amortized cost method and the effective-interest method to amortize the premium. Simpson has a year end of December 31 and follows ASPE.

Required -

a) Prepare the journal entry to record the purchase.

b) Prepare the journal entries for the receipt of interest and amortization of the premium for July 1 and December 31, 2020. Round all values to the nearest dollar.

c) To the nearest dollar, what is the carrying value of the investment at the end of 2021?

Reference no: EM132796561

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