3.) Blue Denim Company invests $10,000,000 in 6% fixed rate corporate bonds on January 1, 2020. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,710,000. Interest is paid on January 1. Prepare journal entries for Blue Denim Company to (a) record the transactions related to these bonds in 2020, assuming Blue Denim does not elect the fair option; and (b) record the transactions related to these bonds in 2020, assuming that Blue Denim Company elects the fair value option to account for these bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Date Account Titles and Explanation Debit Credit (a) (To record interest revenue) (To record fair value adjustment) No. Date Account Titles and Explanation Debit Credit (b) (To record interest revenue) (To record fair value adjustment)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

3.) Blue Denim Company invests $10,000,000 in 6% fixed rate corporate bonds on January 1, 2020. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,710,000. Interest is paid on January 1.

Prepare journal entries for Blue Denim Company to (a) record the transactions related to these bonds in 2020, assuming Blue Denim does not elect the fair option; and (b) record the transactions related to these bonds in 2020, assuming that Blue Denim Company elects the fair value option to account for these bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Date	Account Titles and Explanation	Debit	Credit
(a)



		(To record interest revenue)


		(To record fair value adjustment)

No.	Date	Account Titles and Explanation	Debit	Credit
(b)



		(To record interest revenue)


		(To record fair value adjustment)

Expert Solution

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions