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Prepare the necessary journal entries for yearend

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Question - On January 1, 2019, Keela Company purchased 6% bonds having a maturity value of $250,000. The bonds provide the bondholders with a 5% yield. They are dated January 1, 2019, and mature on January 1, 2024, with interest payments being e-transferred on December 31 of each year. Keela Company uses the effective interest method, the bonds are classified as FV-OCI investments, and Keela 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 yearend 2019. Fair Value on this date is $258,000.

3. Prepare the necessary journal entries for yearend 2020. Fair Value on this date is $253,000.

4. Discuss the implications if Keela were to sell the bonds on January 1, 2021. You can use journal entries with a hypothetical selling value to help support your answer.

Reference no: EM132587532

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