Question
On January 1, 2016, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate.
On January 1, 2016, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31.
Required:
| 1. | Record the purchase of the bonds. |
| 2. | Prepare an investment interest income and discount amortization schedule using the effective interest method. |
| 3. | Record the receipts of interest on June 30, 2016, and June 30, 2018. |
Record the purchase of the bonds on January 1, 2016. Additional Instructions
PAGE 2016
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
| 1 |
| ||||
| 2 |
|
Record the receipts of interest on June 30, 2016, and June 30, 2018. Additional Instructions
PAGE 2016PAGE 2018
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
| 1 |
| ||||
| 2 |
| ||||
| 3 |
|
Prepare an investment interest income and discount amortization schedule using the effective interest method. Additional Instructions
| RODGERS COMPANY |
| Bond Investment Interest Income and Discount Amortization Schedule |
| Effective Interest Method |
| 1 | Date | Cash Debit | Interest Income Credit | Investment in Debt Securities Debit | Carrying Value of Debt Securities |
| 2 | 01/01/16 |
|
|
| |
| 3 | 06/30/16 | ||||
| 4 | 12/31/16 | ||||
| 5 | 06/30/17 | ||||
| 6 | 12/31/17 | ||||
| 7 | 06/30/18 | ||||
| 8 | 12/31/18 |
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