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:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1.
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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