Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,600,000. Interest is paid on January 1. Prepare journal entries for Stave Company to (a) record the transactionsrelated to these bonds in 2017, assuming Stave does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Stave Company elects the fair value option to account for these bonds.
Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,600,000. Interest is paid on January 1. Prepare journal entries for Stave Company to (a) record the transactionsrelated to these bonds in 2017, assuming Stave does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Stave Company elects the fair value option to account for these bonds.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair
related to these bonds in 2017, assuming Stave does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Stave Company elects the fair value option to account for these bonds.
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