P17-1 (Debt Securities)
P17-1 Presented below is an amortization schedule related to Spangler Company’s 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2012, for $108,660.
|
Date |
Cash Received |
Interest Revenue |
Bond Premium Amortization |
Carrying Amount of Bonds |
|
12/31/12 |
|
|
|
$108,660 |
|
12/31/13 |
$7,000 |
$5,433 |
$1,567 |
107,093 |
|
12/31/14 |
7,000 |
5,354 |
1,646 |
105,447 |
|
12/31/15 |
7,000 |
5,272 |
1,728 |
103,719 |
|
12/31/16 |
7,000 |
5,186 |
1,814 |
101,905 |
|
12/31/17 |
7,000 |
5,095 |
1,905 |
100,000 |
The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.
|
12/31/13 |
12/31/14 |
12/31/15 |
12/31/16 |
12/31/17 |
|
|
Amortized cost |
$107,093 |
$105,447 |
$103,719 |
$101,905 |
$100,000 |
|
Fair value |
$106,500 |
$107,500 |
$105,650 |
$103,000 |
$100,000 |
Instructions
(a) Prepare the journal entry to record the purchase of these bonds on December 31, 2012, assuming the bonds are classified as held-to-maturity securities.
(b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2013.
(c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2015.
(d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-for-sale.
(e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2013.
(f) Prepare the journal entry(ies) related to the available-for-sale bonds for 2015.
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