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On January 1,2025, Hi and Lois Company purchased 12% bonds having a maturity value of...

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Accounting

On January 1,2025, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. 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. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows.
2025 $320,500
2026 $309,000
2027 $308,000
2028 $310,000
2029 $300,000
Instructions
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.

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