E17 3 Solution 1

Student Name: ____________________________________
Chpt17
1. *Exercise 17-3
On January 1, 2011, Roosevelt Company purchased 13% bonds, having a maturity value of $525,300, for $585,038.54.
The bonds provide the bondholders with a 10.00% yield. They are dated January 1, 2011, and mature January 1, 2016, with interest receivable December 31 of each year. Roosevelt Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.

1.Prepare
*(a) and
(a)
the(b) journal entry at the date of the bond purchase.
(a) 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 indented585,038.54 when amount is entered. Do not indent manually.)
Debt
Investments
Cash
585,038.54
Account Titles and Explanation

Debit

Credit

(b) Prepare a bond amortization schedule.
13% schedule. 10%
(b) Prepare a bond amortization
(Round answers to 2 decimal places, e.g. 2,525.25.)
Cash
Interest
Premium
Bond Par
EB of
Carrying
of Interest
Revenue and Bond
Premium Amortization
Date
Received Schedule
Revenue
Amorized
Value
Premium
Amount
Effective-Interest Method
1/1/11
525,300
59,738.54
585,038.54
Cash
Interest
Premium
Carrying Amount
12/31/11
68,289
58,503.85Revenue
9,785.15
525,300
49,953.39 of 575,253.39
Date
Received
Amortized
Bonds
12/31/12
68,289
57,525.34
10,763.66
525,300
39,189.73
564,489.73
1/1/11
12/31/13
68,289
56,448.97
11,840.03
525,300
27,349.71
552,649.71
$
$
$
12/31/14
68,289
55,264.97
13,024.03
525,300
14,325.68
539,625.68
12/31/11
12/31/15
68,289
53,963.32
14,325.68
525,300
525,300.00

$

12/31/12
12/31/13

(c) Prepare the journal entry to record the interest received and the amortization for 2011.
12/31/14

12/31/15
Cash

*

68,289

* Difference due to rounding

Interest Revenue
Debt Investments

58,503.85
9,785.15

1. *(c) and (d)
(c) Prepare the journal entry to record the interest received and the