Question $1$ Bond Investments

On January $1,2023,$ Phantom Corp. acquires $$300,000$ of Spider Products, Inc. $9\%$ bonds at a price of $$278,384.$ The interest is payable each December $31,$ and the bonds mature on December $31,2025.$ The investment will provide Phantom Corp. with a $12\%$ yield. Phantom Corp. applies IFRS and accounts for this investment using the amortized cost model.

"Instructions:

a$)$ Prepare a three$-$year bond amortization schedule, rounding to the nearest dollar. Note: USE Excel for linking the numbers and use formulas in Excel for any calculations. $"$

Schedule of Interest Income and Bond Discount Amortization

Effective Interest Method

$9\%$ Bond Purchased to Yield $12\%$

Date Cash Received Interest Income Bond Discount Amortization Carrying Amount of Bonds

b$)$ Prepare the journal entry to record interest received and interest income on December $31,2024.$ Note: USE Excel for linking the numbers and use formulas in Excel for any calculations.

Date Debit Credit

$($c$)$ Prepare the journal entries to record interest received and interest income on December $31,2025,$ and the maturity of the bond. Note: USE Excel for linking the numbers and use formulas in Excel for any calculations.

Date Debit Credit

Alternatively, the entries could be combined in one compound entry:

$($d$)$ Prepare the entry for the disposal of the investment if Phantom had sold the bond on December $31,2024,$ for $$285,270$ instead of holding it to maturity. Assume that $2024$ interest received and interest income have already been recorded. Note: USE Excel for linking the numbers and use formulas in Excel for any calculations.

Date Debit Credit