On January 1, 2020, Pronghorn Company purchased 11% bonds, having a maturity value of $314,000 for $338,426.53. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Pronghorn 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 $336,200 2023 $323,500 2021 $322,500 2024 $314,000 2022 $321,500 (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. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
On January 1, 2020, Pronghorn Company purchased 11% bonds, having a maturity value of $314,000 for $338,426.53. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Pronghorn 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 $336,200 2023 $323,500 2021 $322,500 2024 $314,000 2022 $321,500 (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. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2020, Pronghorn Company purchased 11% bonds, having a maturity value of $314,000 for $338,426.53. The
bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest
received on January 1 of each year. Pronghorn 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 $336,200 2023 $323,500
2021 $322,500 2024
$314,000
2022 $321,500
(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.
(Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not
indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Date
#
#
Account Titles and Explanation
(To record interest received)
(To record fair value adjustment)
Debit
Credit
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