Question: On January 1 , 2 0 2 5 , Copa Company purchased $ 3 0 0 , 0 0 0 , 6 % bonds of

On January

1, 2025,

Copa Company purchased $

300, 000, 6 %

bonds of Cabana Co

.

for $

313, 128 .

The bonds were purchased to yield

5 %

interest. Interest is payable semiannually on July

1

and January

1 .

The bonds mature on January

1, 2030 .

Copa Company uses the effective

-

interest method to amortize discount or premium. On January

1, 2027,

Copa Company sold the bonds for $

305, 600

after receiving interest to meet its liquidity needs.

Instructions

.

Prepare the journal entry to record the purchase of bonds on January

1 .

Assume that the bonds are classified as available

-

for

-

sale.

.

Prepare the amortization schedule for the bonds.

.

Prepare the journal entries to record the semiannual interest on July

1, 2025,

and December

31, 2025 .

.

If the fair value of Cabana bonds is $

310, 000

on December

31, 2026,

prepare the necessary adjusting entry.

(

Assume the fair value adjustment balance on January

1, 2026,

is a credit of $

2, 790 .)

.

Prepare the journal entry to record the sale of the bonds on January

1, 2027 .

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