On January 1, 2008, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price
Question:
On January 1, 2008, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. The interest is payable each December 31, and the bonds mature December 31, 2010. The investment will provide Phantom Company a 12% yield. The bonds are classified as held-to-maturity.
Instructions
(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method.
(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method.
(c) Prepare the journal entry for the interest receipt of December 31, 2009, and the discount amortization under the straight-line method.
(d) Prepare the journal entry for the interest receipt of December 31, 2009, and the discount amortization under the effective-interest method.
Step by Step Answer:
a Schedule of Interest Revenue and Bond Discount Amortization Straightline Method 9 Bond Purchased t...View the full answer
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
