Question
P17-1. (Debt Securities) (LO 1) Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a
P17-1.
(Debt Securities)
(LO 1) Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $108,660.
Date | Cash Received | Interest Revenue | Bond Premium Amortization | Carrying Amount of Bonds |
12/31/15 |
|
|
| $108,660 |
12/31/16 | $7,000 | $5,433 | $1,567 | 107,093 |
12/31/17 | 7,000 | 5,354 | 1,646 | 105,447 |
12/31/18 | 7,000 | 5,272 | 1,728 | 103,719 |
12/31/19 | 7,000 | 5,186 | 1,814 | 101,905 |
12/31/20 | 7,000 | 5,095 | 1,905 | 100,000 |
The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.
| 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 |
Amortized cost | $107,093 | $105,447 | $103,719 | $101,905 | $100,000 |
Fair value | 106,500 | 107,500 | 105,650 | 103,000 | 100,000 |
Instructions
(a)
Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified as held-to-maturity securities.
(b)
Prepare the journal entry(ies) related to the held-to-maturity bonds for 2016.
(c)
Prepare the journal entry(ies) related to the held-to-maturity bonds for 2018.
(d)
Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-for-sale.
(e)
Prepare the journal entry(ies) related to the available-for-sale bonds for 2016.
(f)
Prepare the journal entry(ies) related to the available-for-sale bonds for 2018.
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