Current Attempt in Progress On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year, Indigo Company uses the effective-interest method to allocate unamortized 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. 2025 2026 2027 (a) (b) (c) $293,800 2028 $285,900 $284,800 2029 $283,800 $275,000 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. Prepare the journal entry to record the recognition of fair value for 2026.

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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No.
(a)
(b)
(c)
Date
Account Titles and Explanation
(To record interest received)
(To record fair value adjustment)
Debit
10
Credit
Transcribed Image Text:No. (a) (b) (c) Date Account Titles and Explanation (To record interest received) (To record fair value adjustment) Debit 10 Credit
Current Attempt in Progress
On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. The bonds provide
the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of
each year, Indigo Company uses the effective-interest method to allocate unamortized 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.
2025 $293,800 2028 $285,900
$284,800 2029
$275,000
2026
2027
(b)
(c)
$283,800
Prepare the journal entry at the date of the bond purchase.
Prepare the journal entries to record the interest revenue and recognition of fair value for 2025.
Prepare the journal entry to record the recognition of fair value for 2026.
Transcribed Image Text:Current Attempt in Progress On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year, Indigo Company uses the effective-interest method to allocate unamortized 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. 2025 $293,800 2028 $285,900 $284,800 2029 $275,000 2026 2027 (b) (c) $283,800 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025. Prepare the journal entry to record the recognition of fair value for 2026.
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