Freddy Corporation purchased $1,500,000, 8%, five year bonds on January 1, 2018. Interest is payable on December 31 of each year. When the bonds were issued the market rate was 10%. Freddy records the following transactions. Round all calculations to the nearest dollar. See attached spreadsheet I. Prepare the journal entry for the purchase of the securities which are classified as Available for Sale securities. Prepare all journal entries required on December 31, 2019. Freddy uses the effective interest amortization method. On December 31, 2019, the fair market value of the bonds was $1,450,000. The fair market value of the bonds on December 31, 2018, was $1,500,000.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Freddy Corporation purchased $1,500,000, 8%, five year bonds on January 1, 2018. Interest is
payable on December 31 of each year. When the bonds were issued the market rate was 10%.
Freddy records the following transactions. Round all calculations to the nearest dollar. See attached
spreadsheet I.
Prepare the journal entry for the purchase of the securities which are classified as Available for Sale
securities.
Prepare all journal entries required on December 31, 2019. Freddy uses the effective interest
amortization method. On December 31, 2019, the fair market value of the bonds was $1,450,000.
The fair market value of the bonds on December 31, 2018, was $1,500,000.
Transcribed Image Text:Freddy Corporation purchased $1,500,000, 8%, five year bonds on January 1, 2018. Interest is payable on December 31 of each year. When the bonds were issued the market rate was 10%. Freddy records the following transactions. Round all calculations to the nearest dollar. See attached spreadsheet I. Prepare the journal entry for the purchase of the securities which are classified as Available for Sale securities. Prepare all journal entries required on December 31, 2019. Freddy uses the effective interest amortization method. On December 31, 2019, the fair market value of the bonds was $1,450,000. The fair market value of the bonds on December 31, 2018, was $1,500,000.
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