In: Accounting
On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,808 as an investment. The bonds have a face amount of $80 million and are priced to yield 4%. Interest is paid semiannually. Prepare a partial amortization table at the effective interest rate on June 30 and December 31. Prepare the journal entries necessary to record revenue at the effective interest rate on June 30 and December 31.
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Prepare a partial amortization table at the effective interest rate on June 30 and December 31
Period End | Cash interest received | Bond interest revenue | Discount amortization | Carrying value |
January 1 | 69057808 | |||
June 30 | 1200000 | 1381156 | 181156 | 69238964 |
Dec 31 | 1200000 | 1384779 | 184779 | 69423743 |
Journal entry
Date | account and explanation | Debit | credit |
June 30 | Cash | 1200000 | |
Discount on bonds investment | 181156 | ||
Bond interest revenue | 1381156 | ||
(To record interest) | |||
Dec 31 | Cash | 1200000 | |
Discount on bond investment | 184779 | ||
Bonds interest revenue | 1384779 | ||
(To record interest) |