On January 1, 2020, 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, 2023. 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, 2021. d. Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021.
On January 1, 2020, 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, 2023. 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, 2021.
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 6 images
