On January 1, 2020, Cullumber Company purchased 6% bonds, having a maturity value of $600,000 for $518,458. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2027, with interest paid on June 30 and December 31 of each year. Cullumber 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. 2020 $519,000 2023 $539,000 $514,000 2024 $559,000 $509,000 2021 2022 (a) 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 2020. Prepare the journal entry to record the recognition of fair value for 2021. 3 (b) (c)

On January 1, 2020, Cullumber Company purchased 6% bonds, having a maturity value of $600,000 for $518,458. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2027, with interest paid on June 30 and December 31 of each year. Cullumber 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. 2020 $519,000 2023 $539,000 $514,000 2024 $559,000 $509,000 2021 2022 (a) 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 2020. Prepare the journal entry to record the recognition of fair value for 2021. 3 (b) (c)

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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