Callaho Inc. purchased $95,000 of Ludwig Inc. 8% bonds at a
price of 104.5 on January 1, 2014. The bonds mature on December 31,
2016. Callaho Inc. uses the straight-line method of amortizing any
premium or discount on investments in bonds. At December 31, 2014
and 2015, the market value of the bonds is quoted at 104 and 105,
respectively. Interest is paid out each year on December 31.
Callaho Inc. follows ASPE and management accounts for this
investment at amortized cost.
Show the entry to record the purchase of the bonds, the entry to be
made on December 31, 2014, and the entry to be made on December 31,
2015. Enter an appropriate description when entering the
transactions in the journal. Dates must be entered in the format
dd/mmm (ie. January 15 would be 15/Jan). Please make sure your
final answer(s) are accurate to 2 decimal places.