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Prepare the journal entry at the date of the bond purchase

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Reference no: EM131784129

Problem

On January 1, 2017, Sweet Company purchased 11% bonds, having a maturity value of $312,000, for $ 336,270.95. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1, of each year. Sweet Company uses the effective-interest method to allocate amortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows

2017   $333,900    2020   $321,800
2018    $320,900   2021   $312,000
2019   $320,000

(a) Prepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest revenue and recognition

(c) Prepare the journal entry to record the recognition of fair value for 2018

Reference no: EM131784129

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