4. On January 1, 2022, Arrow Company purchased, as an investment, bonds with a face value of $500,000 for $562,300 to be classified as available-for-sale. The bonds carry a stated annual interest rate of 12% and an effective annual yield of 10%. Interest will be paid on December 31 of each year, and the bonds mature on December 31, 2031. Fair value of the bond investment on 12/31/2022 is $561,000. Required a. Prepare an amortization schedule for 2022, 2023, and 2024 using the effective interest method. b. Prepare the journal entries to record the purchase of the bonds, the interest receipts, and fair value adjustment (if needed) for 2022.
4. On January 1, 2022, Arrow Company purchased, as an investment, bonds with a face value of $500,000 for $562,300 to be classified as available-for-sale. The bonds carry a stated annual interest rate of 12% and an effective annual yield of 10%. Interest will be paid on December 31 of each year, and the bonds mature on December 31, 2031. Fair value of the bond investment on 12/31/2022 is $561,000. Required a. Prepare an amortization schedule for 2022, 2023, and 2024 using the effective interest method. b. Prepare the journal entries to record the purchase of the bonds, the interest receipts, and fair value adjustment (if needed) for 2022.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1MC
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dont give answer in image
![4. On January 1, 2022, Arrow Company purchased, as an investment, bonds with a face value of
$500,000 for $562,300 to be classified as available-for-sale. The bonds carry a stated annual
interest rate of 12% and an effective annual yield of 10%. Interest will be paid on December 31
of each year, and the bonds mature on December 31, 2031. Fair value of the bond investment on
12/31/2022 is $561,000.
Required
a. Prepare an amortization schedule for 2022, 2023, and 2024 using the effective interest
method.
b. Prepare the journal entries to record the purchase of the bonds, the interest receipts, and
fair value adjustment (if needed) for 2022.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fde883f2b-285d-4d55-8493-937a7e117d03%2F8df9efcb-af1e-4b5c-98d3-bde00b6623c2%2F5rop5r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. On January 1, 2022, Arrow Company purchased, as an investment, bonds with a face value of
$500,000 for $562,300 to be classified as available-for-sale. The bonds carry a stated annual
interest rate of 12% and an effective annual yield of 10%. Interest will be paid on December 31
of each year, and the bonds mature on December 31, 2031. Fair value of the bond investment on
12/31/2022 is $561,000.
Required
a. Prepare an amortization schedule for 2022, 2023, and 2024 using the effective interest
method.
b. Prepare the journal entries to record the purchase of the bonds, the interest receipts, and
fair value adjustment (if needed) for 2022.
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