On January 1, 2014, Liu Corporation paid $241,960 to acquire bonds of Peverdo with a par value of $240,000. The annual contract rate on the bonds is 6% and interest is paid semi-annually on June 30 and December 31. The bonds mature after three years. The market rate of interest was 5.7%. Liu Corporation intends to hold the bonds until maturity.
1. Prepare an amortization schedule for the investment showing only 2014.
2. Prepare Liu’s entries to record:
(a) The purchase of the bonds,
(b) The receipt of the first two interest payments.
3. Show how the investment will appear on the December 31, 2014, balance sheet.