Question

On January 1, 2020, Grouper Company purchased 12% bonds, having a maturity value of $274,000 for $294,773.26. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Grouper 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		$292,700		2023		$283,800
2021		$282,500		2024		$274,000
2022		$281,600

(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.

(Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer Page No 0 Amortization schedule Cash received $ 244000 X 12 % - $32880 Interest revenue = 10% x Previous carrying amount Premium amortized - Cash oreceived – Interest revenue Carrying amount = Previous carrying amount - Premium amortized Interest Premium Carrying Date revenue@l04amortized amount 111119 $29477326 $328801 $294771 33 $3402.67 $ 291370159 lilijan $ 32880 5529137.06 $3742.94 $ 287627,65 olea $ 32880 $ 28463.47 $4117,23 $283510.42 141123 $ 32880 $28351.04 $4528.96 248981.46 Welcoyl $32880 $24898.15 $4981.85 $ 274000 1. Cash received 41100 @ On hilao, Debt investment = $294413:06 On gilia].20, Interest creceivable ale = $32880 @

Debt investorent - $ 3402.67 Page. No @ Interest revenue = $9947733 fair value adjustment = $290400 - $291370.59 = $ 1329.41 © On 31/12/21, Interest receivable = $32880 Debt investment = $3742.94 Interest revenue - $ 29137.06 fair value adjustment = 287627.65 - 282500 + 1329141 = $ 6457.06 & Date . Particular Debit Coclit Debt investments $294773.226 - Cash $294773.26 16 31/12/20 Interest receivadle alc $32880 Debt investments $3402.64 Interest revenue $29477.33 31112120 Pain value adjustment $1329141 unvealized holding gain|100- equila $1329141 @ 30/12/21 Interest receivable ale $32880 Debt investments $39427.94 Interest revenue $29137.06

s NO Page No ③ Date Particular Debit Credit 31|1a|21 unrealized holding gais bons - equiling $6457.06 - fair value adjustment - $6457.06.