sible provi ower e TION THREE-INVESTMENTS January 1, 2014, Etterbak Company purc

Question

sible provi ower e TION THREE-INVESTMENTS January 1, 2014, Etterbak Company purchased $200,000, 4% bonds of Kooper Co. for S213.128, ments bonds were purchased to yield 3% interest Interest is payable semiannually on July and January 1. The bonds mature on January 1, 2019. Etterbak Company uses the effective-interest methodo amortize discount or premium. On January 1, 2015, Etterbak Company sold the bonds for $215,600. The bonds are classified as Available for Sale (AFS). The nt: upon th Ty. The Requirements utory (a) Prepare the journal entries to record the semiannual interest on July 1,2014, and December 31, 2014 (6 Marks) impo Date Deseription Credit is $205,000 on December 31, 2014, prepare the necessary adjusting entry. (Show your working) (2+2 Marks) Debit Credit Date Description

Explanation / Answer

As is apparent from the question the whole of the question hasn't been listed completely. The answer is being posted in a generic manner hence and no exact values are being used.

a) Jul 1, 2014

Cash A/c Dr.

      Interest Revenue A/c.

December 31st

Interest Receivable Dr.

      Interest Revenue A/c

And in the following year

Cash Dr,

      Interest Receivable A/c

b) Jan 2015

Fair value adjustment A/c Dr.

              Bond A/c

Or

Bond A/c Dr,

         To Fair Value adjustment A/c

c) Jan 2016

   Cash A/c Dr.

   Loss on sale Dr.

   To Bond Investments       

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