On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $310,000 for $333,502.59. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Indigo 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. 2025 $331,200 2028 $319,100 2029 $318,000 2026 2027 (a) (b) (c) 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 2025. Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.) Date Jan. 1,2025 $320,200 $310,000 Dec. 31, 2025 Account Titles and Explanation Debt Investments Cash Interest Receivable Debt Investments Debit 333.502.59 Credit 333,502.59
On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $310,000 for $333,502.59. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year. Indigo 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. 2025 $331,200 2028 $319,100 2029 $318,000 2026 2027 (a) (b) (c) 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 2025. Prepare the journal entry to record the recognition of fair value for 2026. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.) Date Jan. 1,2025 $320,200 $310,000 Dec. 31, 2025 Account Titles and Explanation Debt Investments Cash Interest Receivable Debt Investments Debit 333.502.59 Credit 333,502.59
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Indigo Company purchased 12% bonds having a maturity value of $310,000 for $333,502.59. The bonds provide
the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of
each year. Indigo 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.
2025
2026
2027
(a)
(b)
(c)
$331,200 2028
$319,100 2029
$318,000
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 2025.
Prepare the journal entry to record the recognition of fair value for 2026.
(List all debit entries before credit entries. 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. Round answers to 2 decimal places, e.g. 1225.25.)
Date
Jan 1, 2025
$320,200
$310,000
Dec 31, 2025
Account Titles and Explanation
Debt Investments
Cash
Interest Receivable
Debt Investments
Debit
333.502.59
ONE
Credit
333,502.59
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