ABC purchased GHJ 5 year bond that is not sure if it will sell or hold...

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.

Expert Solution

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	-

ekkarill92 answered 2 years ago

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