On January 1, 2017, Whispering Company purchased 11% bonds, having a maturity value of $313,000,...
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On January 1, 2017, Whispering Company purchased 11% bonds, having a maturity value of $313,000, for $337,348.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Whispering 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.
| 2017 | $335,100 | 2020 | $322,600 | |||
| 2018 | $321,600 | 2021 | $313,000 | |||
| 2019 | $320,500 |
| (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 2017. | |
| (c) | Prepare the journal entry to record the recognition of fair value for 2018. |
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