2. On December 31, 2015, Culver Company purchased in 496 yield for $192,705. Interest is received yearly on Dec is used for any premium or discount to be wortire amortization schedule related to this debt investment is used for $192,705.5. Culvere le related count to searly on De company purchased $170,000 per of a 7% interest rate and ant to be amortized by the investor. Presented below is an December 31. The effective interest method Cash Received Interest Revenue Date 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 Bond Premium Amortization $11.900 11,900 $7,708 7,541 11.900 11.900 11,900 Carrying Amount of Bonds $192,705 188,513 184,154 179,620 174.905 170.000 7,366 12/31/20 $4,192 4,359 4,534 4,715 4,905 7.185 6,995 The following schedule preser at year-end Schedule presents a comparison of the amortized cost and fair value of the bonds Amortized cost Fair value 12/31/2016 $188,513 $187.900 12/31/2017 $184,154 $186,300 12/31/2018 $179,620 $181,400 12/31/2019 $174,905 $176,000 12/31/2020 $170,000 $170,000 Required: (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2015 and all of the relevant journal entries related this debt investments for 2016 and 2017, assuming the bonds are classified as Held-to-Maturity Securities. (b) Prepare the journal entry to record the purchase of these bonds on December 31, 2015 and all of the relevant journal entries related this debt investments for 2016 and 2017, assuming the bonds are classified as Available-for-Sale Securities. (c) Assuming the bonds are classified as Trading Securities, would your answer to the qusetion (b) be different? If so, indicate clearely what the difference is. 2. On December 31, 2015, Culver Company purchased in 496 yield for $192,705. Interest is received yearly on Dec is used for any premium or discount to be wortire amortization schedule related to this debt investment is used for $192,705.5. Culvere le related count to searly on De company purchased $170,000 per of a 7% interest rate and ant to be amortized by the investor. Presented below is an December 31. The effective interest method Cash Received Interest Revenue Date 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 Bond Premium Amortization $11.900 11,900 $7,708 7,541 11.900 11.900 11,900 Carrying Amount of Bonds $192,705 188,513 184,154 179,620 174.905 170.000 7,366 12/31/20 $4,192 4,359 4,534 4,715 4,905 7.185 6,995 The following schedule preser at year-end Schedule presents a comparison of the amortized cost and fair value of the bonds Amortized cost Fair value 12/31/2016 $188,513 $187.900 12/31/2017 $184,154 $186,300 12/31/2018 $179,620 $181,400 12/31/2019 $174,905 $176,000 12/31/2020 $170,000 $170,000 Required: (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2015 and all of the relevant journal entries related this debt investments for 2016 and 2017, assuming the bonds are classified as Held-to-Maturity Securities. (b) Prepare the journal entry to record the purchase of these bonds on December 31, 2015 and all of the relevant journal entries related this debt investments for 2016 and 2017, assuming the bonds are classified as Available-for-Sale Securities. (c) Assuming the bonds are classified as Trading Securities, would your answer to the qusetion (b) be different? If so, indicate clearely what the difference is
