P17-1 (LO1) (Debt Securities) 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, 2015, for $108,660. Cash Interest Bond Premium Carrying Amount of Bonds Date Received Revenue Amortization 12/31/15 $108,660 107,093 105,447 $5,433 5,354 5,272 5,186 12/31/16 $7,000 7,000 12/31/17 12/31/18 12/31/19 12/31/20 $1,567 1,646 1,728 1,814 7,000 7,000 7,000 103,719 101,905 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. 12/31/16 $107,093 12/31/17 12/31/18 $103,719 12/31/19 12/31/20 $101,905 103,000 Amortized cost $105,447 $100,000 Fair value 106,500 107,500 105,650 100,000 Instructions (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2016. (c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2018. (d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available- for-sale. (e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2016. (A Prepare the journal entry(ies) related to the available-for-sale bonds for 2018.
P17-1 (LO1) (Debt Securities) 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, 2015, for $108,660. Cash Interest Bond Premium Carrying Amount of Bonds Date Received Revenue Amortization 12/31/15 $108,660 107,093 105,447 $5,433 5,354 5,272 5,186 12/31/16 $7,000 7,000 12/31/17 12/31/18 12/31/19 12/31/20 $1,567 1,646 1,728 1,814 7,000 7,000 7,000 103,719 101,905 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. 12/31/16 $107,093 12/31/17 12/31/18 $103,719 12/31/19 12/31/20 $101,905 103,000 Amortized cost $105,447 $100,000 Fair value 106,500 107,500 105,650 100,000 Instructions (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2016. (c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2018. (d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available- for-sale. (e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2016. (A Prepare the journal entry(ies) related to the available-for-sale bonds for 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:P17-1 (LO1) (Debt Securities) 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, 2015, for $108,660.
Cash
Interest
Bond Premium
Carrying Amount
of Bonds
Date
Received
Revenue
Amortization
12/31/15
$108,660
107,093
105,447
$5,433
5,354
5,272
5,186
12/31/16
$7,000
7,000
12/31/17
12/31/18
12/31/19
12/31/20
$1,567
1,646
1,728
1,814
7,000
7,000
7,000
103,719
101,905
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.
12/31/16
$107,093
12/31/17
12/31/18
$103,719
12/31/19
12/31/20
$101,905
103,000
Amortized cost
$105,447
$100,000
Fair value
106,500
107,500
105,650
100,000
Instructions
(a) Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified
as held-to-maturity securities.
(b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2016.
(c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2018.
(d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-
for-sale.
(e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2016.
(A Prepare the journal entry(ies) related to the available-for-sale bonds for 2018.
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