Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/18 $ 185,137 12/31/19 $ 10,200 $ 7,405 $ 2,795 182,342 12/31/20 10,200 7,294 2,906 179,436 12/31/21 10,200 7,177 3,023 176,413 12/31/22 10,200 7,057 3,143 173,270 12/31/23 10,200 6,930 3,270 170,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $ 182,342 $ 179,436 $ 176,413 $ 173,270 $ 170,000 Fair value $ 181,700 $ 181,600 $ 178,300 $ 174,400 $ 170,000 (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry related to the held-to-maturity bonds for 2019. (c) Prepare the journal entry related to the held-to-maturity bonds for 2021.

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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Presented below is an amortization schedule related to Bramble Company’s 5-year, $ 170,000 bond with a 6% interest rate and a 4% yield, purchased on December 31, 2018, for $ 185,137.

Date	Cash Received	Interest Revenue	Bond Premium Amortization	Carrying Amount of Bonds
12/31/18				$ 185,137
12/31/19	$ 10,200	$ 7,405	$ 2,795	182,342
12/31/20	10,200	7,294	2,906	179,436
12/31/21	10,200	7,177	3,023	176,413
12/31/22	10,200	7,057	3,143	173,270
12/31/23	10,200	6,930	3,270	170,000

The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end.

	12/31/19	12/31/20	12/31/21	12/31/22	12/31/23
Amortized cost	$ 182,342	$ 179,436	$ 176,413	$ 173,270	$ 170,000
Fair value	$ 181,700	$ 181,600	$ 178,300	$ 174,400	$ 170,000

(a)		Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming the bonds are classified as held-to-maturity securities.
(b)		Prepare the journal entry related to the held-to-maturity bonds for 2019.
(c)		Prepare the journal entry related to the held-to-maturity bonds for 2021.
(d)		Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for-sale.
(e)		Prepare the journal entries related to the available-for-sale bonds for 2019.
(f)		Prepare the journal entries related to the available-for-sale bonds for 2021.