WEEK 3 TEXTBOOK PROBLEM

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PROBLEMS
 
P17-1.  
(Debt Securities)
 
Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2012, for $108,660.
Date
Cash Received
Interest Revenue
Bond Premium Amortization
Carrying Amount of Bonds
12/31/12
 
 
 
$108,660
12/31/13
$7,000
$5,433
$1,567
  107,093
12/31/14
  7,000
  5,354
  1,646
  105,447
12/31/15
  7,000
  5,272
  1,728
  103,719
12/31/16
  7,000
  5,186
  1,814
  101,905
12/31/17
  7,000
  5,095
  1,905
  100,000
The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.
 
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
Amortized cost
$107,093
$105,447
$103,719
$101,905
$100,000
Fair value
$106,500
$107,500
$105,650
$103,000
$100,000
Instructions
(a)  
Prepare the journal entry to record the purchase of these bonds on December 31, 2012, assuming the bonds are classified as held-to-maturity securities.
(b)  
Prepare the journal entry(ies) related to the held-to-maturity bonds for 2013.
(c)  
Prepare the journal entry(ies) related to the held-to-maturity bonds for 2015.
(d)  
Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-for-sale.
(e)  
Prepare the journal entry(ies) related to the available-for-sale bonds for 2013.
(f)  
Prepare the journal entry(ies) related to the available-for-sale bonds for 2015.
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