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 Decem
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.
\r\nInstructions
\r\n(a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straightline method.
\r\n(b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method.
\r\n(c) Prepare the journal entry for the interest receipt of December 31, 2014, and the discount amortization under the straight-line method.
\r\n(d) Prepare the journal entry for the interest receipt of December 31, 2014, and the discount amortization under the effective-interest method.