Ask Question
BusinessBusiness
14 May, 02:14

On January 1, 2020, Waterway Company purchased 11% bonds, having a maturity value of $312,000 for $336,270.95. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Waterway 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 $333,900 2023 $321,800 2021 $320,900 2024 $312,000 2022 $320,000 (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.

+5
Answers (1)
  1. 14 May, 05:54
    0
    Answer and Explanation:

    The journal entries are shown below:

    1. 11% bonds payable $336,270.95

    To cash $336,270.95

    (Being the bond purchased for cash is recorded)

    2. Cash ($312,000 * 11%) $34,320

    To Interest revenue ($336,270.95 * 9%) $30,264

    To 11% bond payable $4,056

    (Being the interest revenue is recorded)

    Fair value adjustment $1,685.05

    To Unrealized gain $1,685.05

    (Being the recognition of fair value is recorded)

    It is computed below:

    = (333,900 - ($336,270.95 - $4,056))

    3. Unrealized gain $13,000 ($333,900 - $320,900)

    To fair value adjustment $13,000

    (Being the recognition of fair value is recorded)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On January 1, 2020, Waterway Company purchased 11% bonds, having a maturity value of $312,000 for $336,270.95. The bonds provide the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The method for evaluating location alternatives which minimizes shipping costs between multiple sending and receiving locations is:
Answers (2)
Choose the best cover letter opening for an unsolicited job. Because PublicOrg, Inc. is expanding its public relations department, are you in need of a candidate with ten years of public relations experience in the nonprofit sector?
Answers (1)
Which academic skill allows people to explore new concepts
Answers (1)
Although not strictly illegal, the u. s. justice department frowns on reciprocity because the practice
Answers (1)
Mulligan, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires: a.
Answers (1)
New Questions in Business
When responding to behavioral interview questions, you should briefly explain the situation and describe the problem or task, your action, and its results. True or false?
Answers (1)
Which of the following accounts neither increases nor decreases the fund balance of the General Fund during the fiscal year? A. Deferred revenues. B. Revenues. C. Expenditures. D. Other financing sources.
Answers (1)
At Afterbadge, a chain of stores that sells computer accessories, all the marketing activities are planned at the company headquarters. These plans are required to be carried out by the employees without any deviation.
Answers (1)
A teacher writes the results of a test on the board: 7 students received a's, 10 students received b's, 18 students received c's, 4 students received d's and 1 student received an f.
Answers (1)
Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $34,000.
Answers (2)
Home » Business » On January 1, 2020, Waterway Company purchased 11% bonds, having a maturity value of $312,000 for $336,270.95. The bonds provide the bondholders with a 9% yield.
Sign Up Forgot Password?