Prepare the journal entry at the date of the bond purchase

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On January 1, 2009, Roosevelt Company purchased 12% bonds, having a maturity value of $506,000.00, for $524,700.75. The bonds provide the bondholders with a 11% yield. They are dated January 1, 2009, and mature on January 1, 2014, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the available-for-sale category.

The fair value of the bonds at December 31 of each year-end is as follows:

2009 $552,100.00

2010 $512,000.00

2011 $508,000.00

2012 $510,000.00

2013 $500,000.00

(a) Prepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest received and recognition of fair value for 2009.

(c) Prepare the journal entry to record the recognition of fair value for 2010. Assume that the entry to record interest revenue has already been made.

Reference no: EM13482634

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