Question
The following amortization schedule is for Monty Ltd.s investment in Spangler Corp.s $77,500, five-year bonds with a 8% interest rate and a 6% yield, which
The following amortization schedule is for Monty Ltd.s investment in Spangler Corp.s $77,500, five-year bonds with a 8% interest rate and a 6% yield, which were purchased on December 31, 2016, for $84,029:
Cash Received | Interest Income | Bond Premium Amortized | Amortized Cost of Bonds | |||||||||
Dec. 31, 2016 | $84,029 | |||||||||||
Dec. 31, 2017 | $6,200 | $5,042 | $1,158 | 82,871 | ||||||||
Dec. 31, 2018 | 6,200 | 4,972 | 1,228 | 81,643 | ||||||||
Dec. 31, 2019 | 6,200 | 4,899 | 1,301 | 80,342 | ||||||||
Dec. 31, 2020 | 6,200 | 4,821 | 1,379 | 78,963 | ||||||||
Dec. 31, 2021 | 6,200 | 4,738 | 1,463 | 77,500 |
The following schedule presents a comparison of the amortized cost and fair value of the bonds at year end:
Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2021 | ||||||
Amortized cost | $82,871 | $81,643 | $80,342 | $78,963 | $77,500 | |||||
Fair value | $82,290 | $83,664 | $82,263 | $80,049 | $77,500 |
Assume that Monty Ltd. follows IFRS 9 and reports interest income separately from other investment income, except for trading investments accounted for at FV-NI.
1. Prepare the journal entry to record the purchase of these bonds on December 31, 2016, assuming the bonds are accounted for using the amortized cost model. (Credit account titles are automatically indented when the 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.)
2. Prepare the journal entry related to the bonds accounted for using the amortized cost model for 2017. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
3. Prepare the journal entry related to the bonds accounted for using the amortized cost model for 2019. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
4. Prepare the journal entry to record the purchase of these bonds, assuming they are held for trading purposes and accounted for using the FV-NI model. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
5. Prepare the journal entry(ies) related to the trading bonds accounted for using the FV-NI model for 2017. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
6. Prepare the journal entry(ies) related to the trading bonds accounted for using the FV-NI model for 2019. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)
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