(Answered) Question - in january 1 2017 pharoah company purchased 12

Accounting

Question - In January 1, 2017, Pharoah Company purchased 12% bonds, having a maturity value of $278,000, for $299,076.51. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Pharoah Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

2017 $296,600

2018 $287,300

2019 $286,200

2020 $288,200

2021 $278,000

(a) Prepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2017.

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