On January 1, 2015, Columbia Ltd. purchased $200,000 of 10%, 10-year bonds at fa

Question

On January 1, 2015, Columbia Ltd. purchased $200,000 of 10%, 10-year bonds at face value (100) with the intention of selling the bonds early next year. Interest is received semi-annually on July 1 and January 1. At December 31, 2015, which is the company's fiscal year end, the bonds were trading in the market at 97 (this means 97% of maturity value). Using the fair value through profit or loss model, prepare the journal entries to record

(a) the purchase of the bonds on January 1,

(b) the receipt of the interest on July 1, and

(c) any adjusting entries required at December 31.

On January 1, 2015, Columbia Ltd. purchased $200,000 of 10%, 10-year bonds at face value (100) with the intention of selling the bonds early next year. Interest is received semi-annually on July 1 and January 1. At December 31, 2015, which is the company's fiscal year end, the bonds were trading in the market at 97 (this means 97% of maturity value). Using the fair value through profit or loss model, prepare the journal entries to record

(a) the purchase of the bonds on January 1,

(b) the receipt of the interest on July 1, and

(c) any adjusting entries required at December 31.

Brief Exercises BE12.2 Record trading investment. On January 1, 2015, Columbia Ltd. purchased $200,000 of 10%, 10-year bonds at face value (100) with the intention of selling the bonds early next year. Interest is received semi-annually on July 1 and January 1. At December 31, 2015, which is the company's fiscal year end, the bonds were trading in the market at 97 (this means 97% of maturity value). Using the fair value through profit or loss model, prepare the journal entries to record (a) the purchase of the bonds on January 1, (b) the receipt of the interest on July 1, and (c) any adjusting entries required at December 31

Explanation / Answer

01-Jan Bonds receivable 200000                Cash 200000 01-Jul Cash 10000 (200000*10%*6/12)            Interest revenue 10000 31-Dec Interest receivable 10000 (200000*10%*6/12)              Interest revenue 10000 31-Dec Loss on bonds 6000              Bonds receivable 6000

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