Problem 17-1

Presented below is an amortization schedule related to Teal Companys 5-year, $150,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2015, for $163,356.

Date		Cash Received		Interest Revenue		Bond Premium Amortization		Carrying Amount of Bonds
12/31/15								$163,356
12/31/16		$9,000		$6,534		$2,466		160,890
12/31/17		9,000		6,436		2,564		158,326
12/31/18		9,000		6,333		2,667		155,659
12/31/19		9,000		6,226		2,774		152,885
12/31/20		9,000		6,115		2,885		150,000

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		$160,890		$158,326		$155,659		$152,885		$150,000
Fair value		$160,300		$160,500		$157,600		$154,100		$150,000

(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.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)