Presented below is an amortization schedule related to Pearl Company's 5-year, $140,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $152,123. Date 12/31/15 Cash Interest Received Revenue 12/31/16 $9,800 $7,606 $2,194 12/31/17 9,800 7,496 2,304 12/31/18 9,800 7,381 2,419 12/31/19 9,800 12/31/20 9,800 Amortized cost Fair value 7,260 Bond Premium Amortization 7,134 2,666 12/31/16 2,540 $149,929 Carrying Amount of Bonds The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end: $152,123 $149,300 $149,800 149,929 147,625 145,206 142,666 140,000 12/31/17 12/31/18 12/31/19 $147,625 $145,206 $142,666 $147,000 $143,800 12/31/20 $140,000 $140,000
Presented below is an amortization schedule related to Pearl Company's 5-year, $140,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $152,123. Date 12/31/15 Cash Interest Received Revenue 12/31/16 $9,800 $7,606 $2,194 12/31/17 9,800 7,496 2,304 12/31/18 9,800 7,381 2,419 12/31/19 9,800 12/31/20 9,800 Amortized cost Fair value 7,260 Bond Premium Amortization 7,134 2,666 12/31/16 2,540 $149,929 Carrying Amount of Bonds The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end: $152,123 $149,300 $149,800 149,929 147,625 145,206 142,666 140,000 12/31/17 12/31/18 12/31/19 $147,625 $145,206 $142,666 $147,000 $143,800 12/31/20 $140,000 $140,000
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 4E
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![Presented below is an amortization schedule related to Pearl Company's 5-year, $140,000 bond
with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $152,123.
Cash Interest
Date Received Revenue
12/31/15
12/31/16 $9,800 $7,606 $2,194
12/31/17 9,800
12/31/18 9,800
12/31/19 9,800 7,260 2,540
12/31/20 9,800 7,134 2,666
Amortized cost
Bond
Premium
Amortization
Fair value
7,496 2,304
2,419
7,381
Carrying
Amount
of Bonds
$152,123
149,929
147,625
145,206
142,666
The following schedule presents a comparison of the amortized cost and fair value of the bonds
at year-end:
140,000
12/31/16
$149,929 $147,625
$145,206
$142,666
$149,300 $149,800 $147,000 $143,800 $140,000
12/31/17 12/31/18
12/31/19
12/31/20
$140,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3aff2365-9f44-4770-b8e3-e2ed0988bbf7%2Fb41ec7a7-2a55-4b91-8036-d73a4b663565%2Fcqtgnyv_processed.png&w=3840&q=75)
Transcribed Image Text:Presented below is an amortization schedule related to Pearl Company's 5-year, $140,000 bond
with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $152,123.
Cash Interest
Date Received Revenue
12/31/15
12/31/16 $9,800 $7,606 $2,194
12/31/17 9,800
12/31/18 9,800
12/31/19 9,800 7,260 2,540
12/31/20 9,800 7,134 2,666
Amortized cost
Bond
Premium
Amortization
Fair value
7,496 2,304
2,419
7,381
Carrying
Amount
of Bonds
$152,123
149,929
147,625
145,206
142,666
The following schedule presents a comparison of the amortized cost and fair value of the bonds
at year-end:
140,000
12/31/16
$149,929 $147,625
$145,206
$142,666
$149,300 $149,800 $147,000 $143,800 $140,000
12/31/17 12/31/18
12/31/19
12/31/20
$140,000
![(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 related to the held-to-maturity bonds for 2016.
(c) Prepare the journal entry related to the held-to-maturity bonds for 2018.
(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 2016.
(f) Prepare the journal entries related to the available-for-sale bonds for 2018.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3aff2365-9f44-4770-b8e3-e2ed0988bbf7%2Fb41ec7a7-2a55-4b91-8036-d73a4b663565%2Fx2vnzas_processed.png&w=3840&q=75)
Transcribed Image Text:(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 related to the held-to-maturity bonds for 2016.
(c) Prepare the journal entry related to the held-to-maturity bonds for 2018.
(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 2016.
(f) Prepare the journal entries related to the available-for-sale bonds for 2018.
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