On January 1, 2025, Windsor Com

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Question

Subject: accounting 

On January 1, 2025, Windsor Company purchased 12% bonds having a maturity value of $284,000 for $305,531.40. 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. Windsor 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 $303,400 2028
2026 $292,200 2029
2027
$291,200
(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.
No.
(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.)
(a)
(b)
$293,200
0
$284,000
Date
Account Titles and Explanation
(To record interest received)
(To record fair value adjustment)
Debit
Cre
Transcribed Image Text:On January 1, 2025, Windsor Company purchased 12% bonds having a maturity value of $284,000 for $305,531.40. 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. Windsor 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 $303,400 2028 2026 $292,200 2029 2027 $291,200 (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. No. (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.) (a) (b) $293,200 0 $284,000 Date Account Titles and Explanation (To record interest received) (To record fair value adjustment) Debit Cre
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