ABC Company buys a bond as an available for sale security. The bond has a face value of $100,000 and matures in 10 years. The coupon is 6% and interest is paid semiannually on July 1 and December 31. The market rate of interest is 4%. The bond was purchased on January 1, Year 1 for $116,351.43. The carrying value of the bond after amortization on Dec 31, Year 1 was $114,992.03. The FMV of the bond was $113, 925.00 on Dec 31, Year 1.
- Record the entry for receipt of interest on July 1, Year 1. Show computations.
- Make the appropriate adjusting journal entry for Dec 31, Year 1.
- The carrying value of the bond after amortization on Dec 31, Year 2 was $113,465. 49. The FMV of the bond on Dec 31, Year 2 was $113, 524.
- Make the appropriate adjusting journal entry for Dec 31, Year 2.