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Record the entry to purchase the bonds

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Reference no: EM133059962

Question - ABC Company purchased $1,200,000 of 8%, 5-year bonds from XYZ, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1,249,896 at an effective interest rate of 7%, and were held as available for sale.

Required -

1. Record the entry to purchase the bonds.

2. Prepare the following schedule for the first two periods using the effective interest method of amortization.

3. At 12/31/21, the bonds had a fair value of $1,230,000. Prepare the journal entry for the fair value adjustment.

Reference no: EM133059962

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