Question

On January 1, 2017, Windsor Company purchased 9% bonds having a maturity value of $210,000, for $227,221.68. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Windsor Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, e.g. 2,525.25. 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 amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 enter an account title to record the transaction on January 1, 2017 enter a debit amount enter a credit amount enter an account title to record the transaction on January 1, 2017 enter a debit amount enter a credit amount SHOW LIST OF ACCOUNTS

Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 2,525.25.) Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method Date Cash Received Interest Revenue Premium Amortized Carrying Amount of Bonds 1/1/17 $enter a dollar amount rounded to 2 decimal places $enter a dollar amount rounded to 2 decimal places $enter a dollar amount rounded to 2 decimal places $enter a dollar amount rounded to 2 decimal places 1/1/18 enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places 1/1/19 enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places 1/1/20 enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places 1/1/21 enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places 1/1/22 enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places enter a dollar amount rounded to 2 decimal places SHOW LIST OF ACCOUNTS

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017. (Round answers to 2 decimal places, e.g. 2,525.25. 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 amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2017 enter an account title to record the transaction on December 31, 2017 enter a debit amount enter a credit amount enter an account title to record the transaction on December 31, 2017 enter a debit amount enter a credit amount enter an account title to record the transaction on December 31, 2017 enter a debit amount enter a credit amount

Answer 1

Accounts Title and Explanation 1) Debit Credit Date Debt Investments (Held-to-Maturity) $227,221.68 Jan. 1, $227,221.68 Cash 2017 2) Schedule of Interest Revenue and Bond Premium Amortization [Effective-Interest Method] Carrying Interest Premium Cash Amount Amortized [Cash Received each year = $21,000 x 9% = $18,900.00] Date Revenue of Bonds Received (3) (4) = (2)-(3) (2) (6)=(6)-(4) $227,221.68 1/1/2017 1/1/2018 $18,900.00 $15,905.52 $2,994.48 $224,227.20 [Interest Revenue = $227221.68 x 7% = $15905.52] 1/1/2019 $18,900.00 $15,695.90 $3,204.10 $221,023.10 [Interest Revenue = $224227.2 x 7% = $15695.9] 1/1/2020 1/1/2021 $18,900.00 $15,471.62 $3,428.38 $217,594.72 [Interest Revenue = $221023.1 x 7% = $15471.62] $18,900.00 $15,231.63 $3,668.37 $213,926.35 [Interest Revenue = $217594.72 x 7% = $15231.63] 1/1/2022 $18,900.00 $14,974.84 $3,926.35 $210,000.00 [Interest Revenue = $213926.35 x 7% = $14974.84] Accounts Title and Explanation 3) Debit Credit Date [As calculated in Part-2] $18,900.00 Dec. 31, Interest Receivable Debt Investments (Held-to-Maturity) $2,994.48 [Balancing Fig. --> $15905.52 - $18900] [$227221.68 x 7%] 2017 $15,905.52 Interest Revenue NOTE: Interest Receivable account is debited because it is an accrual entry only as interest will be received on 1/1/2018 only.