Question

On January 1, 2020, Sweet Company acquires $120,000 of Spiderman Products, Inc., 9% bonds at a price of $114,135. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Sweet Company a 11% yield. The bonds are classified as held-to-maturity. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round answers to o decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield Interest Bond Discount Revenue Amortization Cash Received Carrying Amount of Bonds Date 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 o decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method Bond Purchased to Yield Interest Bond Discount Revenue Amortization Cash Received Carrying Amount of Bonds Date 1/1/20 $ 1/1/21 1/1/22 1/1/23

Answer 1

Straight Lime Method
Date	Cash recevied	Interest Revenue =Cash received +Bond Discount	Bond Discount amortized         (120000-114135)/3	Carrying amount of Bond
01-01-2020				114135
01/01//21	10800	12755	1955	116090
01-01-2022	10800	12755	1955	118045
01-01-2023	10800	12755	1955	120000
		Dr	Cr
c	Cash recevied	10800
	Debt Investment	1955
	Interest Revenue=11%* Carrying Amount		12755
Effective interest Rate method
Date	Cash recevied	Interest Revenue=11%* Carrying Amount	Bond Discount amortized	Carrying amount of Bond
				114135
	10800	12555	1755	115890
	10800	12748	1948	117838
	10800	12962	2162	120000
d		Dr	Cr
	Cash recevied	10800
	Debt Investment	1755
	Interest Revenue		12555