On January 1, 2017, Indigo Company purchased 10% bonds having a maturity value of $260,000, for $280,761.26. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Indigo Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase.

Prepare a bond amortization schedule

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017.

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018.

Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method Cash Received Interest Revenue Premium Carrying Amount Amortized Date of Bonds 1/1/20 1/1/21 1/1/22 Date Account Titles and Explanation Debit Credit Dec. 31, 2017 Date Account Titles and Explanation Debit Credit Dec. 31, 2018