Problem
On November 30, 2015. Jordan Inc. purchased a $300,000 5-year bond with a 3% stated interest rate from the issuer. Given the yield on the bond was 2%, Jordan paid $314, 140.38 for the bond.
Interest is paid annually on November 30. Jordan uses the fair value through net income (FV-NI) model to account for this investment. At December 31, 2015, the fair value of the bond was $313,000, and at December 31, 2016, the fair value was $312,000. Jordan has an accounting policy of recognizing interest earned separately from fair value adjustments.
Required
Prepare the journal entries required for this investment for 2015.
Prepare the journal entries required for this investment for 2016.
Assuming the investment is sold on March 31, 2017 for $310,000 plus accrued interest, prepare the journal entries required for this investment in 2017.