Presented below is an amortization schedule related to spangler

P17-1 (Debt Securities)

 

P17-1 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.