Question

On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52....

On January 1, 2019, Mancunian Corp. purchased 10% bonds, with a $200,000 face value, for $218,492.52. This price implies an 8% yield to Mancunian. The bonds pay interest on December 31 of each year. Mancunian uses the effective-interest method and classifies the bonds as available for sale securities.

The fair value of the bonds on December 31, 2019 equals $217,200. The fair value of the bonds on December 31, 2020 equals $208,340.

Prepare the journal entries to:

1. Record the purchase of the bonds on January 1, 2019.

2. Record receipt of interest on December 31, 2019.

3. Record the fair value adjustment on December 31, 2019.

4. Record receipt of interest on December 31, 2020.

5. Record the fair value adjustment on December 31, 2020.

6. Record the sale of these bonds on January 1, 2021 for $209,000. cash.

Please complete your answer on a separate piece of paper, then take a picture of your solution or scan it in, and upload the file below. Make sure you show all your work!!

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