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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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