Problem - 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, 2008, for $108,660.
|
DATE
|
CASH RECEIVED
|
INTEREST REVENUE
|
BOND PREMIUM AMORTIZATION
|
CARRYING AMOUNT OF BOND
|
|
12/31/08
|
|
|
|
108,660
|
|
12/31/09
|
7,000
|
5.433
|
1.567
|
107,093
|
|
12/31/10
|
7,000
|
5,354
|
1,646
|
105,447
|
|
12/31/11
|
7,000
|
5,272
|
1,728
|
103,719
|
|
12/31/12
|
7,000
|
5,186
|
1,814
|
101,905
|
|
12/31/13
|
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.
|
|
12/31/09
|
12/31/10
|
12/31/11
|
12/31/12
|
12/31/13
|
|
AMORTIZED COST
|
107,093
|
105,447
|
103,719
|
101,905
|
100,000
|
|
FAIR VALUE
|
106,500
|
107,500
|
105, 650
|
103,000
|
100,000
|
QUESTIONS -
(a) Prepare the journal entry to record the purchase of these bonds on December 31, 2008, assumingthe bonds are classified as held-to-maturity securities.
(b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2009.
(c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2011.
(d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classifiedas available-for-sale.
(e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2009.
(f) Prepare the journal entry(ies) related to the available-for-sale bonds for 2011.