Question

On January 1, 2020, Sweet Company acquires $130,000 of Spiderman Products, Inc., 9% bonds at a price of $120,632. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Sweet Company a 12% yield. The bonds are dassified as held-to-maturity. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round answers to 0 decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield Interest Carrying Amount of Bonds Cash Received Bond Discount Date Revenue Amortization 24 24 1/1/20 1/1/21 1/1/22 1/1/23 Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (Round answers to 0 decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method Bond Purchased to Vield Interest Cash Received Carrying Amount of Bonds Bond Discount Date Revenue Amortization 24 1/1/20 1/1/21 1/1/22 1/1/23 (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. (Round answers to 0 decimal places, e.g. 2,500. 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 anmounts.) No. Account Titles and Explanation Debit Credit (c)

Answer 1

period 1--3 cash flow (A) annual interest $11,700 redemption value $1,30,000 purchase price of bonds = table factor present value (B) (A) *(B) 2.40183 $28,101 0.71178 $92,531 $1,20,632

bond amortization schedule straight line method bond interest cash received discount revenue amortized date 01 January 2020 01 January 2021 01 January 2022 01 January 2023 carrying amount of bonds $1,20,632 $1,23,755 $1,26,878 $1,30,001 $11,700 $11,700 $11,700 $14,823 $14,823 $14,823 $3,123 $3,123 $3,123

bond amortization schedule effective interest method bond interest cash received discount revenue amortized date 01 January 2020 01 January 2021 01 January 2022 01 January 2023 carrying amount of bonds $1,20,632 $1,23,408 $1,26,517 $1,29,999 $11,700 $11,700 $11,700 $14,476 $14,809 $15,182 $2,776 $3,109 $3,482

no date account titles and explanation debit credit (c) $11,700 $3,123 31 December 2021 interest receivable discount on bonds interest revenue (to record interest revenue) $14,476 no date account titles and explanation debit credit (d) $11,700 $3,109 31 December 2021 interest receivable discount on bonds interest revenue (to record interest revenue) $14,809

In case you have any query, kindly ask in comments.