Refer to the information in E9-3, except assume that Mustafa hopes to make a gain on the

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Refer to the information in E9-3, except assume that Mustafa hopes to make a gain on the bonds as interest rates are expected to fall. Mustafa accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and reports interest income. The fair value of the bonds at December 31 of each year end is as follows:
Refer to the information in E9-3, except assume that Mustafa

In E9-3 for reference
On January 1, 2017, Mustafa Limited paid $537,907.40 for 12% bonds with a maturity value of $500,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature on January 1, 2022, with interest receivable on December 31 of each year. Mustafa accounts for the bonds using the amortized cost approach, applies ASPE using the effective interest method, and has a December 31 year end.
Instructions
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare the journal entries to record interest income and interest received and recognition of fair value at December 31, 2017, 2018, and 2019.
(c) Did market interest rates fall as expected? Explain briefly.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Intermediate Accounting

ISBN: 978-1119048534

11th Canadian edition Volume 1

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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