(Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2017, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. Interest is received on January 1 of each year, and the bonds mature on January 1, 2020. The investment will provide Phantom Company a 12% yield. The bonds are classified as held-to-maturity.Instructions(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (c) Prepare the journal entry for the interest revenue and discount amortization under the straight-line method at December 31, 2018. (d) Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2018.
(Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2017, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. Interest is received on January 1 of each year, and the bonds mature on January 1, 2020. The investment will provide Phantom Company a 12% yield. The bonds are classified as held-to-maturity.
Instructions
(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method.
(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method.
(c) Prepare the
(d) Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2018.
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