| P17-1. | (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, 2012, for $108,660. Date | Cash Received | Interest Revenue | Bond Premium Amortization | Carrying Amount of Bonds |
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12/31/12 | | | | $108,660 | 12/31/13 | $7,000 | $5,433 | $1,567 | 107,093 | 12/31/14 | 7,000 | 5,354 | 1,646 | 105,447 | 12/31/15 | 7,000 | 5,272 | 1,728 | 103,719 | 12/31/16 | 7,000 | 5,186 | 1,814 | 101,905 | 12/31/17 | 7,000 | 5,095 | 1,905 | 100,000 |
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The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. | 12/31/13 | 12/31/14 | 12/31/15 | 12/31/16 | 12/31/17 |
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Amortized cost | $107,093 | $105,447 | $103,719 | $101,905 | $100,000 | Fair value | $106,500 | $107,500 | $105,650 | $103,000 | $100,000 |
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Instructions | (a) | Prepare the journal entry to record the purchase of these bonds on December 31, 2012, assuming the bonds are classified as held-to-maturity securities. |
| (b) | Prepare the journal entry(ies) related to the held-to-maturity bonds for 2013. |
| (c) | Prepare the journal entry(ies) related to the held-to-maturity bonds for 2015. |
| (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 2013. |
(f)
| Prepare the journal entry(ies) related to the available-for-sale bonds for 2015.
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