Reporting Bonds Using the Fair Value Option Mitchell Inc. issued 24, 6%, $1,000 bonds on January 1, 2020, for $23,360. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 7%. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts or premiums. On January 1, 2020, Mitchell Inc. elects to account for the bonds using the fair value option. Required a. Record the issuance of bonds on January 1, 2020. b. Record the interest payment on June 30, 2020. c. Record the interest payment on December 31, 2020. d. At December 31, 2020, the market rate on the bonds drops to 7.5% due to a general increase in market risk. Record the adjustment of bonds payable to fair value. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answers to the nearest whole dollar. Date a Jan. 1, 2020 b June 30, 2020 c. Dec. 31, 2020 d. Dec. 31, 2020 Account Name ● ✿ + ÷ ÷ 0 • ÷ + = Dr. Cr.
Reporting Bonds Using the Fair Value Option Mitchell Inc. issued 24, 6%, $1,000 bonds on January 1, 2020, for $23,360. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 7%. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts or premiums. On January 1, 2020, Mitchell Inc. elects to account for the bonds using the fair value option. Required a. Record the issuance of bonds on January 1, 2020. b. Record the interest payment on June 30, 2020. c. Record the interest payment on December 31, 2020. d. At December 31, 2020, the market rate on the bonds drops to 7.5% due to a general increase in market risk. Record the adjustment of bonds payable to fair value. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answers to the nearest whole dollar. Date a Jan. 1, 2020 b June 30, 2020 c. Dec. 31, 2020 d. Dec. 31, 2020 Account Name ● ✿ + ÷ ÷ 0 • ÷ + = Dr. Cr.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please answer in text form without image, every entry should have narrated
Transcribed Image Text:Reporting Bonds Using the Fair Value Option
Mitchell Inc. issued 24, 6%, $1,000 bonds on January 1, 2020, for $23,360. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 7%. The bonds mature December 31, 2022,
and the company uses the effective interest method to amortize bond discounts or premiums. On January 1, 2020, Mitchell Inc. elects to account for the bonds using the fair value option.
Required
a. Record the issuance of bonds on January 1, 2020.
b. Record the interest payment on June 30, 2020.
c. Record the interest payment on December 31, 2020.
d. At December 31, 2020, the market rate on the bonds drops to 7.5% due to a general increase in market risk. Record the adjustment of bonds payable to fair value.
• Note: List multiple debits or credits (when applicable) in alphabetical order.
• Note: Round your answers to the nearest whole dollar.
Date
a. Jan. 1, 2020
b. June 30, 2020
c. Dec. 31, 2020
d. Dec. 31, 2020
Account Name
◆
+
+
+
+
+
+
÷
#
+
#
Dr.
Cr.
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