Question

Exercise 9-14 On July 1, 2020, Flounder Aggregates Ltd. purchased 6% bonds having a maturity value of $85,000 for $88,048. The bonds provide the bondholders with a 5% yield. The bonds mature four years later, on July 1, 2024, with interest receivable June 30 and December 31 of each year. Flounder uses the effective interest method to allocate unamortized discount or premium. The bonds are accounted for using the FV-OCI model with recycling. Flounder has a calendar year end. The fair value of the bonds at December 31, 2020 and 2021, was $87,921 and $86,873, respectively. Assume fair value adjustments are recorded at year end only. Immediately after collecting interest on December 31, 2021, the bonds were sold for $86,873. Prepare the journal entry at the date of the bond purchase. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry Date Account Titles and Explanation Debit Credit July 1, 2020 LINK TO TEXT Prepare a bond amortization schedule to December 31, 2021. (Round answers to O decimal places, e.g. 5,275.) Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method Cash Received Interest Revenue Premium Amortized Date Amortized Cost of Bonds July 1, 2020 Dec 31, 2020 June 30, 2021 Dec. 31, 2021 LINK TO TEXT Prepare the entries and year-end entries from December 31, 2020, through to the collection of interest on December 31, 2021. (Credit account titles are automatically indented wh Date Account Titles and Explanation Debit Credit (To record collection of interest) (To record fair value adjustment) (To record collection of interest) (To record collection of interest) LINK TO TEXT Following the three-step approach, prepare the journal entries for the sale of the bond on December 31, 2021. Include the reclassification of unrealized gains and losses to net income. Account Titles and Explanation Debit Credit (To record fair value adjustment to date of disposal) (To record disposal of the bond) (To reclassify accumulated unrealized gains and losses from OCI to net income)

Answer 1

Answer Page No 0 2020 O Journal enbiy at the date of bond purchase Date Particular Debit Credit Tauly's FU-OCI investment $88,048 cash $88,048 (to record bond purchase) © Bond amortizohen othecuse - ettective interest method Interest Premium Argretiged coof Date of bonds Fuly 1, 2020 *88,048 dec 31,2020 $2550 $2201 349 $87,699 Jun 30,2021 $2550 $2192 $358 $87,34) dec 31, 2021 $2550 $2184 $366 $ 86,975 Cash received levenue amorfized cash received $85000 X 6%* 43550 Interest revenue - Previcur ancestigation canf gf bords xsamine fremócm amortized = cash received - Interest revenue Amortiged cost of bonds - Previous amortized cost of bonds - premium amortized

3 Jownal entries Page No@ Credit Idec 31, 2020 $349 $2201 2020 $222 $358 $2192 Date Particular Debit cash *0550 FV-OCI investments Interest income cro record collection of interest). Dec 3), FV-OCI investment (8792) -84699) 4222 unrealized gain or fors -ocê (to record bair value adjustment) Cash Jun 30, $2550 FV-Oci investments 2021 Interest income (To record collection of interest) Cash $2550 FV-OC} investmenli Interest income (To record collection of interest Journal erbies (bate Particular Debit Unycalized gain or loss oc] [86873-(87921 – $324 Idec 31, 358-366) FV-OCI investments 2021 Horecerd fair valese adjustment to date of dispon) $86873 FV-ocſ investimento [To record disposal of bonds) Lom on disposal investments - EV-OCT $102 onrealized gain or lom) - OCT 24-222) I dec 31, 2001 $366 $ 2184 Credit $324 Cash $86873 #102