Question

On January 1, 2017, Flounder Company purchased 12% bonds having a maturity value of $390,000, for $419,567.77. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Flounder Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2017






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Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 2,525.25.)
Schedule of Interest Revenue and Bond Premium Amortization
Effective-Interest Method
Date
Cash
Received
Interest
Revenue
Premium
Amortized
Carrying Amount
of Bonds
1/1/17
$
$
$
$
1/1/18



1/1/19



1/1/20



1/1/21



1/1/22




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Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2017









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LINK TO TEXT

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2018

Answer 1

A)	Entry at a time of Bond purchase
	Date	Particular	Debit	Credit
	01-Jan-17	Debt Investment (held to Maturity)	$         419,567.77
		Cash/Bank		$                    (419,567.77)
B)	Prepare a bond amortization schedule.
	Schedule of Interest Revenue and Bond Premium Amortization
	Effective-Interest Method
	12% bond of $ 390,000/- & 10% yield
	Date	Cash Received	Interest Revenue	Premium Amortized	Carrying Amount of Bonds
	01/01/2017				$              419,567.77
	01/01/2018	$                                           46,800.00	$           41,956.78	$                           4,843.22	$              414,724.55
	01/01/2019	$                                           46,800.00	$           41,472.45	$                           5,327.55	$              409,397.00
	01/01/2020	$                                           46,800.00	$           40,939.70	$                           5,860.30	$              403,536.70
	01/01/2021	$                                           46,800.00	$           40,353.67	$                           6,446.33	$              397,090.37
	01/01/2022	$                                           46,800.00	$           39,709.04	$                           7,090.96	$              389,999.41
C)	Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017
	Date	Particular	Debit	Credit
	Dec. 31, 2017
		Interest Receivable	$           46,800.00
		Debt Investment (held to Maturity)		$                        (4,843.22)
		Interest Revenue		$                      (41,956.78)
D)	Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018
	Date	Particular	Debit	Credit
	Dec. 31, 2017
		Interest Receivable	$           46,800.00
		Debt Investment (held to Maturity)		$                           5,327.55
		Interest Revenue		$                        41,472.45