E17-5 On January 1, 2013, Phantom Company acquires $200,000 of Spiderman Products, Inc. 9% bonds at a price of $185,589 The

E17-5 (Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2013, 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, 2015. The investment will provide Phantom 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.

(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the
     effective-interest method.

(c) Prepare the journal entry for the interest receipt of December 31, 2014, and the discount
    amortization under the straight-line method.

(d) Prepare the journal entry for the interest receipt of December 31, 2014, and the discount
     amortization under the effective-interest method.

TUTORIAL PREVIEW

(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, 13	—	—	—	185,589.00
Dec 31, 13	18,000.00	22,803.67	4,803.67	190,392.67

 

File name: E17-5 Phantom Company.xls File type: xls PRICE: $6