1 answer

Exercise 17-3 On January 1, 2017, Bonita Company purchased 9% bonds having a maturity value of...

Question:

Exercise 17-3 On January 1, 2017, Bonita Company purchased 9% bonds having a maturity value of $200,000, for $303,599.66. The

Exercise 17-3 On January 1, 2017, Bonita Company purchased 9% bonds having a maturity value of $200,000, for $303,599.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Bonita Company uses the effective interest method to allocate uramortized discount or premium. The bonds are dassified in the held-to-returity category. Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, 0.9. 2,525.25. Credit account thes are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account tities and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Jan 1, 2017 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 Mcthod Cash Interest Premium Carrying Amount Date Received Revenue Amortized of Bonds 1/1/17 1/1/18 1/1/19 1/1/20 1/1/21 1/1/22 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 for the amounts.) Account Titles and Explanation Debit Credit Date Dec 31, 2017 Prepare the journal entry to record the interest revenue and the amartization at December 31, 2018. (Round answers to 2 decimal places, c.g. 2,525.25. Credit account titres 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 for the amounts.) Account Titles and Explanation Debit Credit Date Dec. 31, 2018

Answers

REQUIRED 1 :
Date Account titles and explanation Debit Credit
Jan 1,2017 Debt investments ( Held-to -Maturity ) $ 303,589.66
                            Cash $ 303,589.66
( to record purchase of bonds at premium )
REQUIRED 2 :
                                                                               Schedule of interest Revenue and bond premium amortization
                                                                                                                            Effective - interest Method
Date Cash received Interest revenue Premium Amortized Carrying amount of bonds
01-01-2017 $ 303,589.66
01-01-2018 $ 22,400    {$280,000 *8 %} $ 18,215.38   {$303,589.66*6%} $ 4,184.62 {$ 22,400 - $ 18,215.38} $ 299,405.04 {$303,589.66 - $ 4,184.62}
01-01-2019 $ 22,400    {$280,000 *8 %} $ 17,964.30   {$299,405.04*6%} $ 4,435.70    {$ 22,400 -$ 17,964.30} $ 294,969.34 {$299,405.04 -$ 4,435.70}
01-01-2020 $ 22,400    {$280,000 *8 %} $ 17,698.16    {$ 294,969.34 *6%} $ 4,701.84    {$22,400 - $ 17,698.16 } $ 290,267.50   {$294,969.34 -$ 4,701.84}
01-01-2021 $ 22,400    {$280,000 *8 %} $ 17,416.05   {$290,267.50 *6 % } $ 4,983.95    {$22,400 -$ 17,416.05} $ 285,283.55   {$ 290,267.50 - $ 4,983.95}
01-01-2022 $ 22,400    {$280,000 *8 %} $ 17,117.01   {$ 285,283.55* 6% } $ 5,282.99    {$ 22,400 - $ 17,117.01} $ 280,000.56 {$ 285,283.55 -$5282.99}
REQUIRED 3 :
Date Account titles and explanation Debit Credit
Dec 31,2017 Cash $ 22,400
       Debt investments ( Held-to -Maturity ) $ 4,184.62
      Interest Revenue $ 18,215.38
(To record interest revenue and amortization at Dec 31,2017)
REQUIRED 4 :
Date Account titles and explanation Debit Credit
Dec 31,2018 Cash $ 22,400
       Debt investments ( Held-to -Maturity ) $ 4,435.70
      Interest Revenue $ 17,964.30
(To record interest revenue and amortization at Dec 31,2018)
.

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