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(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) P r epa r e the journal entry(ies) r elated to the held-to-maturity bonds for 2013.
(c) P r epa r e the journal entry(ies) r elated to the held-to-maturity bonds for 2015.
(d) P r epa r e the journal entry(ies) to r eco r d the pu r chase of these bonds, assuming they a r e classified as
available-fo r -sale.
(e) P r epa r e the journal entry(ies) r elated to the available-fo r -sale bonds for 2013.
(f) P r epa r e the journal entry(ies) r elated to the available-fo r -sale bonds for 2015.
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