E17-5 (Effective-Interest versus Straight line bond amortization) On January 1, 2008. Phantom Company acquires $200,000 of Spiderman Products Inc,, 9% bonds at a price of $185,589. The interest is payable each December 31, and the bonds mature December 31, 2010. The investment will provide Phantom Company a 12% yield. The bonds are classified as held to maturity.
Instructions
a.) Prepare a 3 yr schedule of interest revenue and bond discount amortization, applying the straight line method.
b.) Prepare a 3 year schedule of interest revenue and bond discount amortization, applying effective interest method.
c.) Prepare the journal entry for the interest receipt of Dec 31, 2009, and the discount amortization under the straight line method.
d.) Prepare the journal entry for the interest receipt of Dec 31 2008, and the discount amortization under the effective interest method.
Click here for the solution: On January 1, 2008. Phantom Company acquires $200,000 of Spiderman Products Inc,, 9% bonds at a price of $185,589
