(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, 2010, for $108,660.
|
Date |
Cash Received |
Interest Revenue |
Bond Premium Amortization |
Carrying Amount of Bonds |
|
12/31/10 |
$108,660 |
|||
|
12/31/11 |
$7,000 |
$5,433 |
$1,567 |
107,093 |
|
12/31/12 |
7,000 |
5,354 |
1,646 |
105,447 |
|
12/31/13 |
7,000 |
5,272 |
1,728 |
103,719 |
|
12/31/14 |
7,000 |
5,186 |
1,814 |
101,905 |
|
12/31/15 |
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.
|
12/31/11 |
12/31/12 |
12/31/13 |
12/31/14 |
12/31/15 |
|
|
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, 2010, assuming the bonds are classified as held to maturity securities.
(b) Prepare the journal entry(ies) related to the held to maturity bonds for 2011.
(c) Prepare the journal entry(ies) related to the held to maturity bonds for 2013.
(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 2011.
(f) Prepare the journal entry(ies) related to the available for sale bonds for 2013.