BTN 15-3 Kasey Hartman is the controller for Wholemart Company, which has numerous long-term in- ETHICS vestments in debt securities. Wholemart's investments are mainly in five-year bonds. Hartman is prepar- CHALLEN ing its year-end financial statements. In accounting for long-term debt securities, she knows that each long-term investment must be designated as a held-to-maturity or an available-for-sale security. Interest P rates rose sharply this past year, causing the portfolio's fair value to substantially decline. The company does not intend to hold the bonds for the entire five years. Hartman also earns a bonus each year, which is computed as a percent of net income. C Required 1. Will Hartman's bonus depend in any way on the classification of the debt securities? Explain. 2. What criteria must Hartman use to classify the securities as held-to-maturity or available-for-sale? 3. Is there likely any company oversight of Hartman's classification of the securities? Explain. Jolee has reviewed the CC Problem 14-2A Straight-Line: Amortization of bond discount LO P1, P2 Hillside issues $4,000,000 of 6 % , 15-year bonds dated January 1, 2017 that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448. Required: 1. Prepare the January 1, 2017, journal entry to record the bonds issuance. 2() For each semiannual period, complete the table below to calculate the cash payment 2b) For each semiannual period, complete the table below to calculate the straight-line discount amortization 2c For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below teble to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of an amortization table using the straight-line method. 5. Prepare the journal entries to record the first two interest payments. Compte BTN 15-3 Kasey Hartman is the controller for Wholemart Company, which has numerous long-term in- ETHICS vestments in debt securities. Wholemart's investments are mainly in five-year bonds. Hartman is prepar- CHALLEN ing its year-end financial statements. In accounting for long-term debt securities, she knows that each long-term investment must be designated as a held-to-maturity or an available-for-sale security. Interest P rates rose sharply this past year, causing the portfolio's fair value to substantially decline. The company does not intend to hold the bonds for the entire five years. Hartman also earns a bonus each year, which is computed as a percent of net income. C Required 1. Will Hartman's bonus depend in any way on the classification of the debt securities? Explain. 2. What criteria must Hartman use to classify the securities as held-to-maturity or available-for-sale? 3. Is there likely any company oversight of Hartman's classification of the securities? Explain. Jolee has reviewed the CC Problem 14-2A Straight-Line: Amortization of bond discount LO P1, P2 Hillside issues $4,000,000 of 6 % , 15-year bonds dated January 1, 2017 that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448. Required: 1. Prepare the January 1, 2017, journal entry to record the bonds issuance. 2() For each semiannual period, complete the table below to calculate the cash payment 2b) For each semiannual period, complete the table below to calculate the straight-line discount amortization 2c For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below teble to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of an amortization table using the straight-line method. 5. Prepare the journal entries to record the first two interest payments. Compte