Exercise 17-4 On January 1, 2017, Grouper Company purchased 11% bonds, having a

Question

Exercise 17-4 On January 1, 2017, Grouper Company purchased 11% bonds, having a maturity value of $314,000, for $338,426.53. 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. Grouper 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 2018 2019 $336,200 2020 $322,500 2021 $321,500 $323,5000 $314,000 (a) (b) (c) Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest revenue and recognition of fair value for 2017, Prepare the journal entry to record the recognition of fair value for 2018 (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1, 2017 Debt Investments Cash (b) Dec. 31, 2017 Cash Debt Investments Interest Revenue

Explanation / Answer

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Account Titles and Explanation Debit $ Credit $ Debt Investment $3,38,426.53 Cash $3,38,426.53 Cash 34,540.00 Debt Investment 4,081.61 Interest Revenue 30,458.39 Fair Value Adjustment $1,855.08 Unrealized Holding G/L-Equity $1,855.08 Unrealized Holding G/L-Equity 9251.04 Fair Value Adjustment $9,251.04

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