On January 1, 2020, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available for sale. The fair value of the bonds at December 31 of each year-end is as follows. 2020 $320,500 2023 $310,000 2021 $309,000 2024 $300,000 2022 $308,000 Instructions a. Prepare the journal entry at the date of the bond purchase. b. Prepare the journal entries to record the interest revenue and recognition of fair value for 2020. c. Prepare the journal entry to record the recognition of fair value for 2021.
On January 1, 2020, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available for sale.
The fair
2020 $320,500 2023 $310,000
2021 $309,000 2024 $300,000
2022 $308,000
Instructions
a. Prepare the
b. Prepare the journal entries to record the interest revenue and recognition of fair value for 2020.
c. Prepare the journal entry to record the recognition of fair value for 2021.
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