In: Accounting
ABC purchased GHJ 5 year bond that is not sure if it will sell or hold until maturity for $25,000 cash. Face of the note is $20,000.It pays 10% interest annually (1/1). Fair value of the bond at year-end was $24,000. Straight line. Prepare all journal entries.
Journal Entry | ||||
Date | Particulars | Dr. Amt. | Cr. Amt. | |
1 | Investment in GHJ Bonds (AFS) | 25,000.00 | ||
Cash | 25,000.00 | |||
(record the purchase of Bonds) | ||||
2 | Cash | 2,000.00 | $20,000 X 10% | |
Investment in GHJ Bonds (AFS) | 1,000.00 | $5,000 / 5 Year | ||
Interest Revenue | 1,000.00 | |||
(Record the interest received) | ||||
3 | No Fair Value adjustment Entry required | |||
Cost | Fair Value | Difference | ||
Value of the Bonds | 24,000.00 | 24,000.00 | - |