On January 1, Sharp Company purchased $50,000 of Sox Company 6% bonds, at a time...
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On January 1, Sharp Company purchased $50,000 of Sox Company 6% bonds, at a time when the market rate was 5%. The bonds mature on December 31 in five years and pa annually on December 31. Sharp does not intend to trade the bond or to hold them until maturity. Assume that Sharp uses the effective interest method to amortize any prer discount on investments in bonds. At December 31, the bonds are quoted at 98. Note: When answering the following questions, round answers to the nearest whole dollar. a. Prepare the entry for the purchase of the debt investment on January 1. b. Prepare the entry for the receipt of interest on December 31. c. Record the entry to adjust the investment to fair value on December 31 , if applicable. Note: If a journal entry isn't required for the transaction, select "N/ADebit" and "N/A-Credit" as the account names and leave the Dr. and Cr. answers blank (zero)
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