Question
On January 1, 2025, Metlock Company purchased 12% bonds having a maturity value of $270,000 for $290,470. The bonds provide the bondholders with a 10%
On January 1, 2025, Metlock Company purchased 12% bonds having a maturity value of $270,000 for $290,470. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2025, and mature January 1, 2030, with interest received on January 1 of each year (annual). Metlock Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as held-to-maturity.
| Maturity Value of Bonds | |
| Purchase Price of Bonds | |
| Stated Interest Rate | |
| Bond Yield Rate | |
| Interest Payment Term (fraction of annual) |
| Date | Cash Received | Interest Revenue | Bond Premium Amortization | Carrying Amount of Bonds |
| 1/1/2025 | ||||
| 12/31/2025 | ||||
| 12/31/2026 | ||||
| 12/31/2027 | ||||
| 12/31/2028 | ||||
| 12/31/2029 |
2. For the two cases prepare all of the relevant journal entries from the time of purchase until the date indicated. Use the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.) Years 2025-30
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