(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 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.

(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 2025. (c) Prepare the journal entry to record the recognition of fair value for 2026.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2025, Concord Company purchased 12% bonds having a maturity value of $296,000 for $318,441.18. The bonds
provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on
January 1 of each year. Concord 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.
2025 $316,000 2028
$305,500 2029
$304,500
2026
2027
(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 2025.
(c)
Prepare the journal entry to record the recognition of fair value for 2026.
(List all debit entries before credit entries. 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 O for the amounts. Round answers to 2 decimal places, e.g. 1225.25.)
Account Titles and Explanation
Date
Jan. 1, 2025
$306,400
$296,000
Dec. 31, 2025
Debt Investments
Cash
(To record interest received)
Debit
Credit

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