Purchase, Premium Amortization, and Sale of Bond Investment
Response to the following problem:
The Glover Corporation purchased bonds with a face value of $300,000 for $307,493.34 on January 1, 2010. The bonds carry a face rate of interest of 12%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, are due December 31, 2012, and were purchased to yield 11%. On January 1, 2011, in contemplation of a major acquisition, the bonds were sold for $300,000. The company uses the effective interest method.
Required
Prepare journal entries to record the purchase of the bonds, the first two interest receipts, and the sale of the bonds.