On January 1^st, 2011, ABC Inc. purchased a $1,000 bond which pays interest semi-annually on June 30^th and December 31^st each year at the stated rate of 8% per annum. The market rate was 6% on January 1^st, 2011. The bond matures on December 31^st, 2015. There is no active market for the bond, so ABC will account or it using the amortized cost method.
Required:
a) How much was the bond purchased for (ignore brokerage fees)?
b) Provide all required journal entries for 2011.

Question

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The Answer of On January 1^st, 2011, ABC Inc. purchased a $1,000 bond which pays interest semi-annually on June 30^th and December 31^st each year at the stated rate of 8% per annum. The market rate was 6% on January 1^st, 2011. The bond matures on December 31^st, 2015. There is no active market for the bond, so ABC will account or it using the amortized cost method. Required: a) How much was the bond purchased for (ignore brokerage fees)? b) Provide all required journal entries for 2011.

On January 1st, 2011, ABC Inc

On January 1^st, 2011, ABC Inc