Question
E17 .5B (L0 1) (Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2020, Falcon Electro acquires $400,000 of 8% bonds at a price of $442,376.
E17 .5B (L0 1) (Effective-Interest versus Straight-Line Bond Amortization)
On January 1, 2020, Falcon Electro acquires $400,000 of 8% bonds at a price of $442,376. The interest is payable each December 31, and the bonds mature December 31, 2040. The investment will provide Falcon Electro a 7% yield. The bonds are classified as held-to-maturity.
Instructions
(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method.
(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest
method.
(c) Prepare the journal entry for the interest receipt of December 31, 2021, and the discount amortization under the straight-
line method.
(d) Prepare the journal entry for the interest receipt of December 31, 2021, and the discount amortization under the effective-interest method
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