Essay
On January 1, 20X1, Castleton Co. purchased $100,000 of eight percent bonds for $108,530. The bonds were purchased to yield six percent. Interest is paid on July 1 and January 1 and the bonds mature on January 1, 20X6. Castleton Co. uses the effective interest method to amortize the premium and applies the amortized cost method. Required: 1. Prepare the journal entry on January 1, 20X1. 2. Prepare the journal entries for the receipt of interest and amortization of the premium for the remainder of 20X1. 3. What is the carrying value of the investment at the end of 20X1?
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