Question

Presented below is an amortization schedule related to Martinez Company's 5-year, $140,000 bond with a 6% interest rate and a 3% yield, purchased on December 31, 2018, for $159,235. Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds Date 12/31/18 $159,235 12/31/19 $8,400 $4,777 $3,623 155,612 12/31/20 8,400 4,668 3,732 151,880 12/31/21 8,400 4,556 3,844 148,036 12/31/22 8,400 4,441 3,959 144,077 12/31/23 8,400 4,323 4,077 140,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Amortized cost $155,612 $155,000 $151,880 $154,100 $148,036 $150,000 $144,077 $145,100 $140,000 $140,000 Fair value (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2018, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry related to the held-to-maturity bonds for 2019. (c) Prepare the journal entry related to the held-to-maturity bonds for 2021. (d) Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for-sale. (e) Prepare the journal entries related to the available-for-sale bonds for 2019. (f) Prepare the journal entries related to the available-for-sale bonds for 2021.

Answer 1

solution coedit bebit $159,235 159,235 quoo 4777 cash 3,623 Given data to Date Account titles and Explanation a) Dec 31 Hell-to maturity securities 2018 To cash b) Dec, 3 cash Held to-Maturity secusitis Interest revenue c) Dec 31, 2019 Held for maturity securities Interest Revenue d) Dec, 31 2021 Available for sale secesitties To cash e) Dec, 31 cash 2011 Available for sale securities Interest Revenue conocalized Holiding Gain of loss 8,400 4,556 3844 $159,235 159,235 8,400 UUU! 3,959 -612 -Equity secunities forvalul Adjustment TO AFS and 612 cash 8,400 7 Dec, 3) 2021 2 41556 3804 Available for sale securities Interest Revenue Securities far o value Adjustment (AFS) ongealized Holding Grain of Equity loss 1964 1964

b) Dec 31, 2018 = cash 28400. Held to-maturity security =6777 28400~4777 = 3623 c) Dec 31, 2019 - Cash - Heldto matuoity security 2 4400-4556 2 cuyo & Dec 31, 412019 - Cash - Available - for sale securities z 8,400-409l = 3959 Equity secasities favaue Adjustment. Amortized cost - Fairvalue f) Dec = $ 155,612-$155,000 = 612 31, 2021 → Cash- Available for sale securities 840o –4556 = 3844 secuditres fair value Adjustment Afsa ($150,000-$148036) laby un realized Holding Gain of Equity loss 1964