AC 302 Chapter 17 Question 5

AC 302 Chapter 17 Question 5
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
E17-5 (Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2012, Morgan .						
Company acquires		$300,000 	of Nicklaus, Inc.,		9%	bonds at a 
price of	$278,384 	. The interest is payable each December 31, and the bonds mature 				
December 31, 2014. The investment will provide Morgan Company a					12%	yield. The
bonds are classified as held-to-maturity.						
Note: Due to significant digits and rounding, there may be slight differences in values.						
Instructions:						
"(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the
     straight-line method."						
						
						
Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method						
9% Bond Purchased to Yield 12%						
	Date	"Cash
Received"	"Interest
Revenue"	"Bond
Discount
Amortization"	"Carrying
Amount
of Bonds"	
	Jan 1, 12	—	—	—	Amount	
	Dec 31, 12	Formula	Formula	Formula	Formula	
	Dec 31, 13	Formula	Formula	Formula	Formula	
	Dec 31, 14	Formula	Formula	Formula	Formula	
						
"(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the
     effective-interest method."						
						
						
Schedule of Interest Revenue and Bond Discount Amortization Effective Interest Method						
9% Bond Purchased to Yield 12%						
	Date	"Cash
Received"	"Interest
Revenue"	"Bond
Discount
Amortization"	"Carrying
Amount
of Bonds"	
	Jan 1, 12	—	—	—	Amount	
	Dec 31, 12	Formula	Formula	Formula	Formula	
	Dec 31, 13	Formula	Formula	Formula	Formula	
	Dec 31, 14	Formula	Formula	Formula	Formula	
						
"(c) Prepare the journal entry for the interest receipt of December 31, 2013, and the discount
    amortization under the straight-line method."						
						
						
Dec 31, 13	Account Title			Amount		
	Account Title			Amount		
	Account Title				Amount	
						
"(d) Prepare the journal entry for the interest receipt of December 31, 2013, and the discount
     amortization under the effective-interest method."						
						
						
Dec 31, 13	Account Title			Amount		
	Account Title			Amount		
	Account Title				Amount