On January 1, 2018, Ambrosia Corp. purchased 7% 5-year bonds with face value of $600,000. The bonds were dated January 1, 2018, and would mature on January 1, 2023. The bonds would pay interest twice a year, on July 1 and January 1. Ambrosia paid $652,513 for the bonds to yield 5% (market rate). Ambrosia accounted for the bonds at FV-OCI. Ambrosia’s fiscal year end was December 31. Fair values of the bonds on December 31, 2018 and 2019 respectively were: 2018 $625,648 2019 $699,408 a. Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for the first 3 years. Cash recieved Interest income Premium/discount amortization FV-OCI investment b. Prepare all necessary journal entries in 2018, to record interest income and an adjustment to fair value. c. The bonds were sold on July 1, 2020 at 112, immediately after collecting interest due on that date. Prepare all necessary journal entries for the sale of the bonds.
Please show all steps on how every number is coming from.
On January 1, 2018, Ambrosia Corp. purchased 7% 5-year bonds with face value of $600,000. The bonds were dated January 1, 2018, and would mature on January 1, 2023. The bonds would pay interest twice a year, on July 1 and January 1. Ambrosia paid $652,513 for the bonds to yield 5% (market rate). Ambrosia accounted for the bonds at FV-OCI. Ambrosia’s fiscal year end was December 31. Fair
2018 $625,648
2019 $699,408
a. Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for the first 3 years.
| Cash recieved | Interest income | Premium/discount amortization | FV-OCI investment |
b. Prepare all necessary
c. The bonds were sold on July 1, 2020 at 112, immediately after collecting interest due on that date. Prepare all necessary journal entries for the sale of the bonds.
Step by step
Solved in 4 steps
