On January 1, 2025, Vaughn Company purchased 12% bonds having a maturity value of $320,000 for $344,260.74. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received January 1 of each year. Vaughn 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 $342,000 2028 $330,700 2026 $329,700 2029 $320,000 2027 $328,700 (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 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.

On January 1, 2025, Vaughn Company purchased 12% bonds having a maturity value of $320,000 for $344,260.74. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received January 1 of each year. Vaughn 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 $342,000 2028 $330,700 2026 $329,700 2029 $320,000 2027 $328,700 (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 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.

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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