Problem 17-01Presented below is an amortization schedule related to Stellar Company’s 5-year, $180,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $195,586.Date CashReceived InterestRevenue Bond PremiumAmortization Carrying Amountof Bonds12/31/18 $195,58612/31/19 $12,600 $9,779 $2,821 192,76512/31/20 12,600 9,638 2,962 189,80312/31/21 12,600 9,490 3,110 186,69312/31/22 12,600 9,335 3,265 183,42812/31/23 12,600 9,172 3,428 180,000The 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 12/31/23Amortized cost $192,765 $189,803 $186,693 $183,428 $180,000Fair value $192,200 $191,800 $188,500 $184,500 $180,000(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.(Credit account titles are automatically indented when 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.)No.DateAccount Titles and ExplanationDebitCredit(a)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount (b)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter 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 (c)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter 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 (d)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount (e)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter an account title to record interest revenue enter a debit amount enter a credit amount enter an account title to record interest revenue enter a debit amount enter a credit amount enter an account title to record interest revenue enter a debit amount enter a credit amount (To record interest revenue.) enter an account title to record adjustment enter a debit amount enter a credit amount enter an account title to record adjustment enter a debit amount enter a credit amount (To record adjustment.) (f)choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021enter an account title to record interest revenue enter a debit amount enter a credit amount enter an account title to record interest revenue enter a debit amount enter a credit amount enter an account title to record interest revenue enter a debit amount enter a credit amount (To record interest revenue.) enter an account title to record adjustment enter a debit amount enter a credit amount enter an account title to record adjustment enter a debit amount enter a credit amount (To record adjustment.)

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Presented below is an amortization schedule related to Stellar Company’s 5-year, $180,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $195,586. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/18 $195,586 12/31/19 $12,600 $9,779 $2,821 192,765 12/31/20 12,600 9,638 2,962 189,803 12/31/21 12,600 9,490 3,110 186,693 12/31/22 12,600 9,335 3,265 183,428 12/31/23 12,600 9,172 3,428 180,000 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 $192,765 $189,803 $186,693 $183,428 $180,000 Fair value $192,200 $191,800 $188,500 $184,500 $180,000 (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.

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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Problem 17-01

Presented below is an amortization schedule related to Stellar Company’s 5-year, $180,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $195,586.

Date	Cash Received	Interest Revenue	Bond Premium Amortization	Carrying Amount of Bonds
12/31/18				$195,586
12/31/19	$12,600	$9,779	$2,821	192,765
12/31/20	12,600	9,638	2,962	189,803
12/31/21	12,600	9,490	3,110	186,693
12/31/22	12,600	9,335	3,265	183,428
12/31/23	12,600	9,172	3,428	180,000

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	$192,765	$189,803	$186,693	$183,428	$180,000
Fair value	$192,200	$191,800	$188,500	$184,500	$180,000

(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.

(Credit account titles are automatically indented when 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.)

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
(b)	choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021	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
(c)	choose a transaction date Dec. 31, 2018 Dec. 31, 2019Dec. 31, 2021	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
(d)	choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
(e)	choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021	enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		(To record interest revenue.)
		enter an account title to record adjustment	enter a debit amount	enter a credit amount
		enter an account title to record adjustment	enter a debit amount	enter a credit amount
		(To record adjustment.)
(f)	choose a transaction date Dec. 31, 2018Dec. 31, 2019Dec. 31, 2021	enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		enter an account title to record interest revenue	enter a debit amount	enter a credit amount
		(To record interest revenue.)
		enter an account title to record adjustment	enter a debit amount	enter a credit amount
		enter an account title to record adjustment	enter a debit amount	enter a credit amount
		(To record adjustment.)

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