Kuban Company acquired $3,500,000 face value, 8% bonds as an available-for-sale investment on January 1 of the current year when the market rate of interest was 10%.
Interest is paid annually each December 31. Kuban purchased the bonds, which mature in 12 years, for $3,023,042. Kuban amortizes the discount using the effective interest rate method. The fair value of the bonds at the end of the year is $3,000,000.
1-Given the face value of the bond,the promised interest payments and interest rates, is the purchase price correct ?
2-Journal entry needed on December 31 to record the interest payments received ?
3-Journal entry needed to account for the fair value of the bonds on December 31 assuming Kuban does not intend to actively trade or hold them till maturity ?
4- Journal entry for the bonds that are sold on Jan 1 of the second year for 3,000,000?
