On July 31, 2019, Diogenes Inc. purchased 9%, $200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective interest method for amortizing premium or discount. The current market rate was 10% and as a result Diogenes paid $187,711 for the bonds. On December 31, 2019, the bonds have a market value of $188,000.

Instructions

Assuming the company uses amortized cost to account for the investment: 

a) Record the entry for the purchase of the bonds. 

b) Record the receipt of interest and amortization of the discount for 2017. 

c) Record any year-end adjustments required.

Answer rating: 100% (QA)

Answer a Journal Entries Description Debit Credit Bonds revaluation on market 9399 Bonds receivable ... View the full answer