On January 1, 2025, Sandhill Company purchased 5% bonds, having a maturity value of $490,000 for $420,359. The bonds provide th bondholders with a 7% yield. They are dated January 1, 2025, and mature January 1, 2035, with interest receivable June 30 and December 31 of each year. Sandhill 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. 2025 $421,000 2028 2026 2027 416,000 2029 411,000 $441,000 461,000 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest received and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.
On January 1, 2025, Sandhill Company purchased 5% bonds, having a maturity value of $490,000 for $420,359. The bonds provide th bondholders with a 7% yield. They are dated January 1, 2025, and mature January 1, 2035, with interest receivable June 30 and December 31 of each year. Sandhill 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. 2025 $421,000 2028 2026 2027 416,000 2029 411,000 $441,000 461,000 (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare the journal entries to record the interest received and recognition of fair value for 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Sandhill Company purchased 5% bonds, having a maturity value of $490,000 for $420,359. The bonds provide the
bondholders with a 7% yield. They are dated January 1, 2025, and mature January 1, 2035, with interest receivable June 30 and
December 31 of each year. Sandhill 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.
2025
2026
2027
(a)
(b)
(c)
$421,000 2028 $441,000
416,000 2029
411,000
461,000
Prepare the journal entry at the date of the bond purchase.
Prepare the journal entries to record the interest received and recognition of fair value for 2025.
Prepare the journal entry to record the recognition of fair value for 2026.
Transcribed Image Text:(Round answers to O decimal places, e.g. 2,525. Credit account titles are automatically indented when the 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. List all debit entries before credit entries.)
Date
in. 1, 2025
Jun. 30, 2025
Dec. 31, 2025
Dec. 31, 2025
ec. 31, 2026
Account Titles and Explanation
Debt Investments
Cash
Cash
Debt Investments
Interest Revenue
Cash
Debt Investments
Interest Revenue
(To record interest received)
Unrealized Holding Gain or Loss-Equity
Fair Value Adjustment
(To record fair value adjustment)
Unrealized Holding Gain or Loss-Equity
Fair Value Adjustment
Debit
420359
24500
4925
24500
100 0
4925
4284
9554
Credit
420359
DO BOOGI
29425
29425
4284
9554
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