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Question#01: On January 1,2013, THD Company purchased 12% bonds having a maturity value...

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Accounting

Question#01:
On January 1,2013, THD Company purchased 12% bonds having a maturity value of Tk.
300,000. The bonds provide the bondholders with a 10% yield. They are dated January 1,2013,
and mature January 1,2018, with interest receivable December 31 of each year. THD Company
uses the effective-interest method to allocate unamortized discount or premium. The securities
are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end
is as follows.
2013
2015
2017
300,000
2014
Required:
(a) Indicate whether the bonds were purchased at a discount or at a premium.
(b) Prepare the journal entry at the date of the bond purchase.
(c) Prepare the journal entries to record the interest received for 2013.
(d) Prepare the adjusting entry to record the bonds at fair value at December 31,2013. The
Fair Value Adjustment account has a debit balance of Tk.1,000 prior to adjustment
(e) Prepare the journal entry to record the recognition of fair value for 2014
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