Acc423 Intermediate Accounting: E17-4 On January 1, 2011, Roosevelt Company purchased 12% bonds

Acc423 Intermediate Accounting

E17-4 Entries for Available-for-Sale Securities
On January 1, 2011, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2011, and mature on January 1, 2016, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the available-for-sale category.
The fair value of the bonds at December 31 of each year-end is as follows:
2011 534,200 2014 517,000
2012 515,000 2015 500,000
2013 513,000

Instructions:
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare the journal entry to record the interest received and recognition of fair value for 2011.
(c ) Prepare the journal entry to record the recognition of fair value for 2012.
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