Exercise 173 On January 1 2017 Cullumber Company purchased 1

Exercise 17-3

On January 1, 2017, Cullumber Company purchased 10% bonds having a maturity value of $220,000, for $237,567.22. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Cullumber Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Prepare the journal entry at the date of the bond purchase. (Enter answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when 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.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1, 2017

Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 2,525.25.)

Schedule of Interest Revenue and Bond Premium Amortization
Effective-Interest Method

Date

Cash
Received

Interest
Revenue

Premium
Amortized

Carrying Amount
of Bonds

1/1/17

$

$

$

$

1/1/18

1/1/19

1/1/20

1/1/21

1/1/22

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when 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.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2017

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when 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.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2018

Exercise 17-3 On January 1, 2017, Cullumber Company purchased 10% bonds having a maturity value of $220,000, for $237,567.22. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Cullumber Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

Solution

Date Account titles and Explanation Debit Credit 1/1/2017 Debt Investments 237,567.22 cash 237,567.22 Bond Amortization Schedule Date Cash Interest Premium Carrying Received Revenue Amortized amount 1/1/2017 237,567.22 1/1/2018 22000 19005.38 2994.62 234572.60 1/1/2019 22,000 18765.81 3234.19 231338.41 1/1/2020 22,000 18507.07 3492.93 227845.48 1/1/2021 22,000 18227.64 3772.36 224073.12 1/1/2022 22,000 17926.88 4073.12 220000.00 cash received = 220,000*10% interest revenue = carrying amount of previous yr *8% Date Account titles and Explanation Debit Credit 12/31/2017 Interest receivable 22,000 Debt investments 2,994.62 Interest income 19,005.38 12/31/2018 Interest receivable 22,000 Debt investments 3,234.19 Interest income 18,765.81