In: Accounting
On January 1, 2017, Culver Company purchased 12% bonds, having a maturity value of $275,000, for $295,849.07. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Culver 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.
2017 | $293,800 | 2020 | $285,900 | |||
2018 | $284,800 | 2021 | $275,000 | |||
2019 | $283,800 |
(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 2017. | |
(c) | Prepare the journal entry to record the recognition of fair value for 2018. |