Presented below is an amortization schedule related to Spangler Company’s 5-year, $135,300 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2012, for $147,017.
Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds
12/31/12 $147,017
12/31/13 $9,471 $7,351 $2,120 144,897
12/31/14 9,471 7,245 2,226 142,671
12/31/15 9,471 7,134 2,337 140,334
12/31/16 9,471 7,017 2,454 137,880
12/31/17 9,471 6,894 2,580 135,300
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
Amortized cost $144,897 $142,671 $140,334 $137,880 $135,300
Fair value $144,373 $144,753 $142,204 $138,973 $135,300
Required:
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 related to the held-to-maturity bonds for 2013.
(c) Prepare the journal entry related to the held-to-maturity bonds for 2015.
(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 2013.
(f) Prepare the journal entries related to the available-for-sale bonds for 2015.