Presented below is an amortization schedule related to Vaughn Company's 5-year, $130,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2015, for $141,575. Carrying Bond Cash Interest Premium Amount of Bonds Date Received Amortization Revenue 12/31/15 $141,575 12/31/16 $7,800 $5,663 $2,137 139,438 12/31/17 7,800 5,578 2,222 137,216 12/31/18 7,800 2,311 134,905 5,489 5,396 12/31/19 7,800 2,404 132,501 7,800 130,000 12/31/20 5,299 2,501 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end: 12/31/19 12/31/16 12/31/17 12/31/18 12/31/20 Amortized cost $134,905 $139,438 $137,216 $132,501 $130,000 Fair value $138,900 $139,500 $137,000 $133,600 $130,000 (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 related to the held-to-maturity bonds for 2016. (c) Prepare the journal entry related to the held-to-maturity bonds for 2018. (d) Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for- sale. (e) Prepare the journal entries related to the available-for-sale bonds for 2016. (f) Prepare the journal entries related to the available-for-sale bonds for 2018. (a) (b) (c) (d) (e) (To record interest revenue.) (To record adjustment.) (f) (To record interest revenue.) (To record adjustment.) Presented below is an amortization schedule related to Vaughn Company's 5-year, $130,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2015, for $141,575. Carrying Bond Cash Interest Premium Amount of Bonds Date Received Amortization Revenue 12/31/15 $141,575 12/31/16 $7,800 $5,663 $2,137 139,438 12/31/17 7,800 5,578 2,222 137,216 12/31/18 7,800 2,311 134,905 5,489 5,396 12/31/19 7,800 2,404 132,501 7,800 130,000 12/31/20 5,299 2,501 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end: 12/31/19 12/31/16 12/31/17 12/31/18 12/31/20 Amortized cost $134,905 $139,438 $137,216 $132,501 $130,000 Fair value $138,900 $139,500 $137,000 $133,600 $130,000 (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 related to the held-to-maturity bonds for 2016. (c) Prepare the journal entry related to the held-to-maturity bonds for 2018. (d) Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for- sale. (e) Prepare the journal entries related to the available-for-sale bonds for 2016. (f) Prepare the journal entries related to the available-for-sale bonds for 2018. (a) (b) (c) (d) (e) (To record interest revenue.) (To record adjustment.) (f) (To record interest revenue.) (To record adjustment.)
