Question

On January 1, 2020, Flounder Corp. acquires $317,000 of Spider Products Inc. 7% bonds at a price of $300,952. The interest is payable each December 31, and the bonds mature on December 31, 2022. The investment will provide Flounder Corp. with a 9% yield. Flounder Corp. applies IFRS and accounts for this investment using the amortized cost model.

Prepare a three-year bond amortization schedule. (Round answers to 0 decimal places, e.g. 5,275.)

Schedule of Interest Income and Bond Discount Amortization Effective Interest Method
Date		Cash Received		Interest Income		Bond Discount Amortization		Carrying Amount of Bonds
01/01/20								$enter a dollar amount rounded to 0 decimal places
12/31/20		$enter a dollar amount rounded to 0 decimal places		$enter a dollar amount rounded to 0 decimal places		$enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places
12/31/21		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places
12/31/22		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places

eTextbook and Media

List of Accounts

  

  

Prepare the journal entry to record interest received and interest income on December 31, 2021. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2021	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31	enter a debit amount	enter a credit amount

eTextbook and Media

List of Accounts

  

  

Prepare the journal entries to record interest received and interest income on December 31, 2022, and the maturity of the bond. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2022	enter an account title to record collection of interest on December 31	enter a debit amount	enter a credit amount
	enter an account title to record collection of interest on December 31	enter a debit amount	enter a credit amount
	enter an account title to record collection of interest on December 31	enter a debit amount	enter a credit amount
	(To record collection of interest)
Dec 31, 2022	enter an account title to record maturity of bond investment on December 31	enter a debit amount	enter a credit amount
	enter an account title to record maturity of bond investment on December 31	enter a debit amount	enter a credit amount
	(To record maturity of bond investment)

eTextbook and Media

List of Accounts

  

  

Prepare the entry for the disposal of the investment if Flounder had sold the bond on December 31, 2021 for $283,000 instead of holding it to maturity. Assume that 2021 interest received and interest income have already been recorded. (Credit account titles are automatically indented when the 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. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount

Answer 1

1	Date	Cash Received	Interest Income	Bond Discount Amortization	Carrying Amount of Bonds
	01/01/20				300,952
	12/31/20	22,190	27,086	4,896	305,848
	12/31/21	22,190	27,526	5,336	311,184
	12/31/22	22,190	28,006	5,816	317,000
2
Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2021	Cash	22,190
	Bond Investment at Amortized Cost	5,336
	Interest Revenue		27,526
3
Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2022	Cash	22,190
	Bond Investment at Amortized Cost	5,816
	Interest Revenue		28,006
Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2022	Cash	317,000
	Bond Investment at Amortized Cost		317,000
4
Date	Account Titles and Explanation	Debit	Credit
Dec 31, 2021	Cash	283,000
	Loss on Sale of Investment	28,184
	Bond Investment at Amortized Cost		311,184