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. (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.) No. Date Account Titles and Explanation Debit Credit (a) choose a transaction date enter an account title to record transaction A enter a debit amount enter a credit amount enter an account title to record transaction A enter a debit amount enter a credit amount (b) choose a transaction date enter an account title to record interest

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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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.

(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.)

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	choose a transaction date	enter an account title to record transaction A	enter a debit amount	enter a credit amount
		enter an account title to record transaction A	enter a debit amount	enter a credit amount
(b)	choose a transaction date	enter an account title to record interest received	enter a debit amount	enter a credit amount
		enter an account title to record interest received	enter a debit amount	enter a credit amount
		enter an account title to record interest received	enter a debit amount	enter a credit amount
		(To record interest received)
		enter an account title to record fair value adjustment	enter a debit amount	enter a credit amount
		enter an account title to record fair value adjustment	enter a debit amount	enter a credit amount
		(To record fair value adjustment)
(c)	choose a transaction date	enter an account title to record transaction C	enter a debit amount	enter a credit amount
		enter an account title to record transaction C	enter a debit amount	enter a credit amount

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