Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2018. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2021.

Required:

1.

Prepare an investment interest income and discount amortization schedule using the:

a.

straight-line method

b.

effective interest method

2.

Prepare the July 1, 2020, journal entries to record the interest income under both methods.

Prepare the July 1, 2020, journal entry to record the interest income under the straight-line method.Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3

Prepare the July 1, 2020, journal entry to record the interest income under the effective interest method. Additional Instructions

PAGE 1

GENERAL JOURNAL

DATE

ACCOUNT TITLE

POST. REF.

DEBIT

CREDIT

1

2

3

Prepare an investment interest income and discount amortization schedule using the straight-line method. Additional Instructions

TUDOR COMPANY

Bond Investment Interest Income and Discount Amortization Schedule

Straight-Line Method

1	Date	Cash Debit	Investment in Debt Securities Debit	Interest Income Credit	Carrying Value of Debt Securities
2	01/01/18
3	07/01/18
4	01/01/19
5	07/01/19
6	01/01/20
7	07/01/20
8	01/01/21

Prepare an investment interest income and discount amortization schedule using the effective interest method. Additional Instructions

TUDOR COMPANY

Bond Investment Interest Income and Discount Amortization Schedule

Effective Interest Method

1	Date	Cash Debit	Interest Income Credit	Investment in Debt Securities Debit	Carrying Value of Debt Securities
2	01/01/18
3	07/01/18
4	01/01/19
5	07/01/19
6	01/01/20
7	07/01/20
8	01/01/21