Reference no: EM133038947
Question - On January 1, 2020, Mandem Inc. purchased 4% bonds having a maturity value of $100,000. The bonds provide the bondholders with a 3% yield. They are dated January 1, 2020, and mature on January 1, 2025, with interest payments being e-transferred on December 31 of each year. Mandem Inc. uses the effective interest method, the bonds are classified as FV-OCI investments, and has a December 31st year end.
Required -
1. Prepare the journal entry at the date of the bond purchase.
2. Prepare the necessary journal entries for year end 2020. Fair Value on this date is $104,000.
3. Prepare the necessary journal entries for year end 2021. Fair Value on this date is $101,000.
4. Discuss the implications if Mandem Inc. were to sell the bonds on January 1, 2022. You can use journal entries with a hypothetical selling value to help support your answer.
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