Question

On January 1, a company purchased 4%, 10-year corporate bonds for $63,842,205 as an investment. The bonds have a face amount of $75 million and are priced to yield 6%. Interest is paid semiannually. Prepare a partial amortization table at the effective interest rate on June 30 and December 31 Prepare the journal entries necessary to record revenue at the effective interest rate on June 30 and December 31 Complete this question by entering your answers in the tabs below. Amort Table General Journal Prepare a partial amortization table at the effective interest rate on June 30 and December 31. (Round your intermediate calculations to the nearest dollar amount. Enter your answers in whole dollars. Round final answers to the nearest whole dollar.) Period-End Cash Interest Bond Interest Received Revenue Discount Amortization Carrying Value $ 63,842,205 January 1 June 30 December 31 Amort Table General Journal >

Answer 1

Amortization Table:

Period-End	Cash Interest Received	Bond Interest Revenue	Discount Amortization	Carrying Value
January 1				$63,842,205
June 30	$1,500,000	$1,915,266	$415,266	$64,257,471
December 30	$1,500,000	$1,927,724	$427,724	$64,685,195

Cash interest received = Face value x semi-annual interest rate of 4% = $75,000,000 x 2% = $1,5000,000

Bond interest revenue = Preceding carrying value x 3% [semi-annual interest rate of 6% is 3%]

Discount amortization = Bond interest revenue - Cash interest received

Carrying value = Preceding carrying value + Discount amortization

Journal Entries:

	Date	Account title and Explanation	Debit	Credit
1	June 30	Cash	$1,500,000
		Discount on bonds receivable	$415,266
		Interest revenue		$1,915,266
		[To record cash received for interst revenue on bonds]
2	December 31	Cash	$1,500,000
		Discount on bonds receivable	$427,724
		Interest revenue		$1,927,724
		[To record cash received for interst revenue on bonds]