Answered: Monty Corp. invested in a three-year,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Monty Corp. invested in a three-year, $100 face value 9% bond, paying $95.11. At this price, the bond will yield a 11% return. Interest is payable annually.

Prepare a bond discount amortization table for Monty Corp., assuming Monty uses the effective interest method required by IFRS. (Round answers to 2 decimal places, e.g. 52.75.)

Bond Discount Amortization Table
Date	Cash Received	Interest Income	Bond Discount Amortization	Amortized Cost of Bond
Day 1				$enter a dollar amount
End Year 1	$enter a dollar amount	$enter a dollar amount	$enter a dollar amount	enter a dollar amount
End Year 2	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
End Year 3	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
	$enter a total amount	$enter a total amount	$enter a total amount

Prepare journal entries to record the initial investment, receipt of interest, and recognition of interest income in each of the three years, and the maturity of the bond at the end of the third year. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

Date	Account Titles and Explanation	Debit	Credit
Day 1	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
End of Year 1	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
End of Year 2	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
End of Year 3	enter an account title to record interest collected	enter a debit amount	enter a credit amount
	enter an account title to record interest collected	enter a debit amount	enter a credit amount
	enter an account title to record interest collected	enter a debit amount	enter a credit amount
	(To record interest collected)
	enter an account title to record maturity of bond investment	enter a debit amount	enter a credit amount
	enter an account title to record maturity of bond investment	enter a debit amount	enter a credit amount
	(To record maturity of bond investment)

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