On January 1, 2020, Sage Company purchased 11% bonds, having a maturity value of $ 301,000 for $ 324,415.24. 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. Sage 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 $ 322,200 2023 $ 310,9002021 $ 309,800 2024 $ 301,0002022 $ 308,900 (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.PLEASE HELP IT SAYS THAT CASH IS WRONG ANSWER WHEN ENTERED. HERE IS THE LIST OF ACCOUNTS. THANK YOU Accumulated Other Comprehensive LossAllowance for Doubtful AccountsAllowance to Reduce Inventory to MarketBad Debt ExpenseBonds PayableCashCall OptionCommon StockCost of Goods SoldDebt InvestmentsDividend RevenueDividend ReceivableEquity InvestmentsFair Value AdjustmentFutures ContractGain on Sale of InvestmentsGain on Settlement of Call OptionGain on Settlement of Put OptionInterest ExpenseInterest ReceivableInterest RevenueInventoryInvestment IncomeLoss on ImpairmentLoss on Sale of InvestmentsLoss on Settlement of Call OptionLoss on Settlement of Put OptionNo EntryNotes PayablePaid-in Capital in Excess of Par - Common StockPut OptionRecovery of Loss from ImpairmentRetained EarningsRevenue from InvestmentSales RevenueSwap ContractUnrealized Holding Gain or Loss - EquityUnrealized Holding Gain or Loss - Income DateAccount Titles and ExplanationDebitCreditJan. 1, 2020Debt Investments324415.24Cash324415.24Dec. 31, 2020Cash33110Debt Investments3912.63Interest Revenue29197.37(To record interest received)Fair Value Adjustment1697.39Unrealized Holding Gain or Loss - Equity1697.39(To record fair value adjustment)Dec. 31, 2021Unrealized Holding Gain or Loss - Equity8135.23Fair Value Adjustment8135.23

Bond purchased: In order to obtain money from investors who are prepared to lend them money for a…

Answered: On January 1, 2020, Sage Company…

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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Question

On January 1, 2020, Sage Company purchased 11% bonds, having a maturity value of $ 301,000 for $ 324,415.24. 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. Sage 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	$ 322,200	2023	$ 310,900
2021	$ 309,800	2024	$ 301,000
2022	$ 308,900

(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.

PLEASE HELP IT SAYS THAT CASH IS WRONG ANSWER WHEN ENTERED.

HERE IS THE LIST OF ACCOUNTS. THANK YOU

Accumulated Other Comprehensive Loss
Allowance for Doubtful Accounts
Allowance to Reduce Inventory to Market
Bad Debt Expense
Bonds Payable
Cash
Call Option
Common Stock
Cost of Goods Sold
Debt Investments
Dividend Revenue
Dividend Receivable
Equity Investments
Fair Value Adjustment
Futures Contract
Gain on Sale of Investments
Gain on Settlement of Call Option
Gain on Settlement of Put Option
Interest Expense
Interest Receivable
Interest Revenue
Inventory
Investment Income
Loss on Impairment
Loss on Sale of Investments
Loss on Settlement of Call Option
Loss on Settlement of Put Option
No Entry
Notes Payable
Paid-in Capital in Excess of Par - Common Stock
Put Option
Recovery of Loss from Impairment
Retained Earnings
Revenue from Investment
Sales Revenue
Swap Contract
Unrealized Holding Gain or Loss - Equity
Unrealized Holding Gain or Loss - Income

Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2020
Debt Investments
324415.24
Cash
324415.24
Dec. 31, 2020
Cash
33110
Debt Investments
3912.63
Interest Revenue
29197.37
(To record interest received)
Fair Value Adjustment
1697.39
Unrealized Holding Gain or Loss - Equity
1697.39
(To record fair value adjustment)
Dec. 31, 2021
Unrealized Holding Gain or Loss - Equity
8135.23
Fair Value Adjustment
8135.23

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