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.