Exercise 175 Part Level Submission On January 1 2013 Phantom

Exercise 17-5 (Part Level Submission)

On January 1, 2013, Phantom Company acquires $302,500 of Spiderman Products, Inc., 8% bonds at a price of $287,455. The interest is payable each December 31, and the bonds mature December 31, 2015. The investment will provide Phantom Company a 10.00% yield. The bonds are classified as held-to-maturity.

(a)

Schedule of Interest Revenue and Bond Discount Amortization
Straight-line Method
Bond Purchased to Yield

Date

Cash
Received

Interest
Revenue

Bond Discount
Amortization

Carrying Amount
of Bonds

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

(b)

Schedule of Interest Revenue and Bond Discount Amortization
Effective-Interest Method
Bond Purchased to Yield

Date

Cash
Received

Interest
Revenue

Bond Discount
Amortization

Carrying Amount
of Bonds

SHOW LIST OF ACCOUNTS

Exercise 17-5 (Part Level Submission) On January 1, 2013, Phantom Company acquires $302,500 of Spiderman Products, Inc., 8% bonds at a price of $287,455. The interest is payable each December 31, and the bonds mature December 31, 2015. The investment will provide Phantom Company a 10.00% yield. The bonds are classified as held-to-maturity.

Solution

a) Cash received Interest revenue Bond Discount amortization Carrying amount of bonds 1/1/13 287455 12/31/13 24200 29215 5015 292470 12/31/14 24200 29215 5015 297485 12/13/15 24200 29215 5015 302500 b) Cash received Interest revenue Bond Discount amortization Carrying amount of bonds 1/1/13 287455 12/31/13 24200 28745.5 4545 292000 12/31/14 24200 29200 5000 297000 12/13/15 24200 29700 5500 302500