Question

On January 1, 2020, Sandhill Company purchased 8% bonds having a maturity value of $400,000, for $433,699.52. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sandhill 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. (Enter answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2020	enter an account title to record the transaction on January 1, 2020	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on January 1, 2020	enter a debit amount	enter a credit amount

eTextbook and Media

Prepare a bond amortization schedule. (Round answers to 2 decimal places, e.g. 2,525.25.)

Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method
Date		Cash Received		Interest Revenue		Premium Amortized		Carrying Amount of Bonds
1/1/20		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places
1/1/21		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/22		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/23		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/24		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
1/1/25		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places

eTextbook and Media

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2020	enter a debit amount	enter a credit amount

eTextbook and Media

Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021. (Round answers to 2 decimal places, e.g. 2,525.25. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021	enter an account title to record the transaction on December 31, 2021	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2021	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2021

Answer 1

Requirement:1

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2020	Debt Investments	$ 433,699.52
	Cash		$   433,699.52
	(To record bonds purchased

Requirement:2

Schedule of Interest Revenue and Bond Premium Amortization
Effective Interest Method
Date	Cash Received(a)	Interest Revenue (b)	Premium Amortized(a-b)	Carrying Amount of Bonds
1/1/2020				$         433,699.52
1/1/2021	$           32,000.00	$                      26,021.97	$                              5,978.03	$         427,721.49
1/1/2022	$           32,000.00	$                      25,663.29	$                              6,336.71	$         421,384.78
1/1/2023	$           32,000.00	$                      25,283.09	$                              6,716.91	$         414,667.87
1/1/2024	$           32,000.00	$                      24,880.07	$                              7,119.93	$         407,547.94
1/1/2025	$           32,000.00	$                      24,452.06	$                              7,547.94	$         400,000.00

Notes:

Last Year, Interest Revenue is adjusted in order to arrive at $ 400,000 [ Face Value]

Requirement:3

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020	Interest Receivables [400000*8%]	$    32,000.00
	Debt Investments		$       5,978.03
	Interest revenue [433699.52*6%]		$     26,021.97
	( To record interest receivables)

Requirement:4

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021	Interest Receivables [400000*8%]	$    32,000.00
	Debt Investments		$       6,336.71
	Interest revenue 427721.49*6%]		$     25,663.29
	( To record interest receivables)