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Record the purchase of the bonds and the entries

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On June 30, 2020 Martley Corp purchased 6%, $100,000 10 year bonds. Interest is paid annually on Dec 31. Martley uses the amortized cost model and the effective interest method for amortizing any premium or discount. The current market rate was 7% and as a result Martley paid $93,290 for the bonds. On December 31, 2020 the bonds have a market value of $90,000. The bonds had a market value of $93,000 on December 31, 2021.

Problem 1: Assuming the company uses amortized cost to account for the investment, record the purchase of the bonds and the entries for 2020 and 2021.

Reference no: EM132788076

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