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1. On April 1, 2020, Ghost Co. purchased $120,000 of six percent, 10-year bonds to yield 5%. The bonds are accounted for as a fair value net income investment. Interest is paid on October 1 and April 1, and the bonds mature on July 1, 2025. The fair market value on December 31, 2020, was $126,000. Ghost follows IFRS and uses the effective interest method. The bonds are sold on March 1, 2021, at 103 plus accrued interest. (to the nearest dollar) Instructions Prepare the following journal entries:

1. On April 1, 2020, Ghost Co. purchased $120,000 of six percent, 10-year bonds to yield 5%. The bonds are accounted for as a fair value net income investment. Interest is paid on October 1 and April 1, and the bonds mature on July 1, 2025. The fair market value on December 31, 2020, was $126,000. Ghost follows IFRS and uses the effective interest method. The bonds are sold on March 1, 2021, at 103 plus accrued interest. (to the nearest dollar) Instructions Prepare the following journal entries:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. On April 1, 2020, Ghost Co. purchased $120,000 of six percent, 10-year bonds to yield 5%. The bonds are accounted for as a fair value net income investment. Interest is paid on October 1 and April 1, and the bonds mature on July 1, 2025. The fair market value on December 31, 2020, was $126,000. Ghost follows IFRS and uses the effective interest method. The bonds are sold on March 1, 2021, at 103 plus accrued interest. (to the nearest dollar) Instructions Prepare the following journal entries: April 1, 2020, purchase Oct. 1, 2020, interest payment Dec. 31, 2020, interest accrual Dec. 31, 2020, fair value adjustment. March 1, 2021, interest accrual and sale.
Transcribed Image Text:1. On April 1, 2020, Ghost Co. purchased $120,000 of six percent, 10-year bonds to yield 5%. The bonds are accounted for as a fair value net income investment. Interest is paid on October 1 and April 1, and the bonds mature on July 1, 2025. The fair market value on December 31, 2020, was $126,000. Ghost follows IFRS and uses the effective interest method. The bonds are sold on March 1, 2021, at 103 plus accrued interest. (to the nearest dollar) Instructions Prepare the following journal entries: April 1, 2020, purchase Oct. 1, 2020, interest payment Dec. 31, 2020, interest accrual Dec. 31, 2020, fair value adjustment. March 1, 2021, interest accrual and sale.
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