On January 1, 2017, Marin Company purchased 9% bonds having a maturity value of
ID: 2548645 • Letter: O
Question
On January 1, 2017, Marin Company purchased 9% bonds having a maturity value of $250,000, for $270,502.00. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Marin 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.
Prepare a bond amortization schedule.
Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017.
Prepare the journal entry to record the interest revenue and the amortization at December 31, 2018.
On January 1, 2017, Marin Company purchased 9% bonds having a maturity value of $250,000, for $270,502.00. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Marin Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Explanation / Answer
(a)
Date
Particulars
Debit ($)
Credit ($)
01-03-2017
Debt Investments (Held-to-Maturity)A/c
2,70,502
To Cash A/c
2,70,502
Bond Amortization Schedule
Date
Cash Received
Interest
Premium amortised
Closing Value
01.01.2017
-
-
$ 270502
31.12.2017
$ 22500
18935
3565
266937
31.12.2018
$ 22500
18686
3814
263123
31.12.2019
$ 22500
18418
4082
259041
31.12.2020
$ 22500
18133
4367
254674
31.12.2021
$ 22500
17827
4674
250000
© & (d)
Date
Particulars
Debit ($)
Credit ($)
31-12-2017
Cash A/c
22500
To Debt Investments (Held-to-Maturity)A/c
3565
To Interest Revenue A/c
18935
31-12-2018
Cash A/c
22500
To Debt Investments (Held-to-Maturity)A/c
3814
To Interest Revenue A/c
18686
Date
Particulars
Debit ($)
Credit ($)
01-03-2017
Debt Investments (Held-to-Maturity)A/c
2,70,502
To Cash A/c
2,70,502