On January 1 2017 Pronghorn Limited paid 50499855 for 12 bon

On January 1, 2017, Pronghorn Limited paid $504,998.55 for 12% bonds with a maturity value of $487,000. The bonds provide the bondholders with a 11% yield. They are dated January 1, 2017, and mature on January 1, 2022, with interest receivable on December 31 of each year. Pronghorn accounts for the bonds using the amortized cost approach, applies ASPE using the effective interest method, and has a December 31 year end.

1. Prepare the journal entry to record the bond purchase. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

2. Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 52.75.)

3. Prepare the journal entry to record interest received and interest income for 2017. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

4. Prepare the journal entry to record interest received and interest income for 2018. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

5. Prepare the journal entry to record the redemption of the bond at maturity. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

6. If Pronghorn used the straight-line method of discount/premium amortization, prepare the journal entry to record interest received and interest income the company would make each year. (Credit account titles are automatically indented when the 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. Round answers to 2 decimal places, e.g. 52.75.)

7.Compute the total interest income reported over the five-year period under the effective interest method and the straight-line method. (Round answers to 0 decimal places, e.g. 5,275.)

Schedule of Interest Income and Bond Premium Amortization Effective Interest Method
Date	Cash Received		Interest Income		Premium Amortization		Carrying Amount of Bonds
01/01/17							$
12/31/17	$		$		$
12/31/18
12/31/19
12/31/20
12/31/21
	$		$		$

Solution

Date/S.N. Account title & Explanation Debit Credit Amount in $ Amount in $ Bonds amortization schedule Requirement 2 Requirement 1 January 1, 2017 Investment in Bonds 487000 Date Cash received Interest Income Premium amortization Carrying amount of bonds Premium on Bonds 17998.55 01-01-2017 17998.55 504998.55 Cash 504998.6 12-31-2017 58440 55549.84 15108.39 502108.39 To record the purchase of bonds 12-31-2018 58440 55231.92 11900.31 498900.31 12-31-2019 58440 54879.03 8339.35 495339.35 Requirement 3 December 31, 2017 Cash 58440 12-31-2020 58440 54487.33 4386.68 491386.68 Premium on Bonds 2890.16 12-31-2021 58440 54052.53 487000 Interest Income 55549.84 To record the interest income for the year As per the policy of chegg, we are supposed to answer maximum of 4 sub-parts of a question Requirement 4 December 31, 2018 Cash 58440 Premium on Bonds 3208.077 Thank You Interest Income 55231.92 To record the interest income for the year