Question

On January 1, 2020, Sheffield Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheffield 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.

2020		$309,400		2023		$299,100
2021		$297,900		2024		$289,000
2022		$296,900

(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 2020.
(c)		Prepare the journal entry to record the recognition of fair value for 2021.

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	choose a transaction date Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021	enter an account title to record transaction A	enter a debit amount	enter a credit amount
		enter an account title to record transaction A	enter a debit amount	enter a credit amount
(b)	choose a transaction date Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021	enter an account title to record interest received	enter a debit amount	enter a credit amount
		enter an account title to record interest received	enter a debit amount	enter a credit amount
		enter an account title to record interest received	enter a debit amount	enter a credit amount
		(To record interest received)
		enter an account title to record fair value adjustment	enter a debit amount	enter a credit amount
		enter an account title to record fair value adjustment	enter a debit amount	enter a credit amount
		(To record fair value adjustment)
(c)	choose a transaction date Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021	enter an account title to record transaction C	enter a debit amount	enter a credit amount
		enter an account title to record transaction C	enter a debit amount	enter a credit amount

Answer 1