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Prepare the necessary journal entries for year end

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Question - On January 1, 2019, Clover Inc. purchased 3% bonds having a maturity value of $100,000. The bonds provide the bondholders with a 2% yield. They are dated January 1, 2019, and mature on January 1, 2024, with interest payments being e-transferred on December 31 of each year. Clover Inc. uses the effective interest method, the bonds are classified as FV-OCI investments, and has a December 31st year end.

1. Prepare the journal entry at the date of the bond purchase.

2. Prepare the necessary journal entries for year end 2019. Fair Value on this date is $104,000

3. Prepare the necessary journal entries for year end 2020. Fair Value on this date is $101,000

4. Discuss the implications if Clover Inc. were to sell the bonds on January 1, 2021. You can use journal entries with a hypothetical selling value to help support your answer.

Reference no: EM133045965

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