Question
The following schedule of premium amortization on a bond investment has been provided to you. Issue date is 1/1/2013, and maturity date is 12/31/17. Interest
The following schedule of premium amortization on a bond investment has been provided to you. Issue date is 1/1/2013, and maturity date is 12/31/17. Interest is received on Dec 31 of each year.
Effective-Interest Method of amortization 12% (stated rate) Bonds purchased to Yield 10% Face value of the bond investment = $300,000
| Date | Cash Interest Received | Interest Revenue recorded | Premium Amortized | Unamortized Premium | Carrying Value of Investment |
| 1/1/13 |
|
|
| $22,744.44 | $322,744.44 |
| 12/31/13 | $36,000 | $32,274.44 | $3,725.56 | $19,018.88 | 319,018.88 |
| 12/31/14 | 36,000 | 31,901.89 | 4,098.11 | $14,920.77 | 314,920.77 |
| 12/31/15 | 36,000 | 31,492.08 | 4,507.92 | $10,412.85 | 310,412.85 |
| 12/31/16 | 36,000 | 31,041.29 | 4,958.71 | $5,454.14 | 305,454.14 |
| 12/31/17 | 36,000 | 30,545.86 | 5,454.14 | 0 | 300,000.00 |
The securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows:
| 2013 | $320,500 |
| 2014 | $309,000 |
| 2015 | $308,000 |
| 2016 | $310,000 |
| 2017 | $300,000 |
Prepare the journal entries to record the year-end recognition of fair value for each of the five years.
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Auditing And Financial Management Actions Taken By DOD On GAO Recommendations To Improve Spare Parts Requirements Determination NSIAD 85 61
Authors: U.S. Government Accountability Office
1st Edition
1287183859, 978-1287183853
