On January 1, 2020, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price
Question:
On January 1, 2020, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. 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 revenue and discount amortization under the straight-line method at December 31, 2021.
d. Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel