On January 1, 2025, Wildhorse Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. 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. Wildhorse 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 $293,800 2028 $285,900 $284,800 2029 $275,000 $283,800 (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
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Chapter1: Financial Statements And Business Decisions
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Vikram bhai

On January 1, 2025, Wildhorse Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. 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. Wildhorse 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
$293,800 2028 $285,900
$284,800 2029
$275,000
$283,800
(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.
(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.)
Transcribed Image Text:On January 1, 2025, Wildhorse Company purchased 12% bonds having a maturity value of $275,000 for $295,849.07. 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. Wildhorse 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 $293,800 2028 $285,900 $284,800 2029 $275,000 $283,800 (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. (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.)
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