Teal Mountain Incorporated issued $0.62 million of 6.5%, 10-year bonds on July 1, 2019, at face value. Interest is payable each December 31. The company has chosen to apply the fair value option in accounting for the bonds. A risk assessment at December 31, 2020, shows that Teal Mountain’s credit risk has increased, and as a result of the increased credit risk, the fair value of the bonds is $558,000 on that date. Prepare the company’s journal entries on December 31, 2020, if Teal Mountain follows ASPE.

Teal Mountain Incorporated issued $0.62 million of 6.5%, 10-year bonds on July 1, 2019, at face value. Interest is payable each December 31. The company has chosen to apply the fair value option in accounting for the bonds. A risk assessment at December 31, 2020, shows that Teal Mountain’s credit risk has increased, and as a result of the increased credit risk, the fair value of the bonds is $558,000 on that date.

Prepare the company’s journal entries on December 31, 2020, if Teal Mountain follows ASPE. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2020

     
       
 

(To record payment of interest)

   

Dec. 31, 2020

     
       
 

(To record fair value adjustment)

Prepare the company’s journal entries on December 31, 2020, if Teal Mountain follows IFRS 9. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2020

     
       
 

(To record payment of interest)

   

Dec. 31, 2020

     
       
 

(To record fair value adjustment)

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