Question

On January 1, 2020, Tamarisk Company acquires $110,000 of Spiderman Products, Inc., 9% bonds at a price of $99,611. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Tamarisk Company a 13% yield. The bonds are classified as held-to-maturity.

Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round answers to 0 decimal places, e.g. 2,500.)

Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield
Date		Cash Received		Interest Revenue		Bond Discount Amortization		Carrying Amount of Bonds
1/1/20		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
1/1/21		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/22		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/23		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount

Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (Round answers to 0 decimal places, e.g. 2,500.)

Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method Bond Purchased to Yield
Date		Cash Received		Interest Revenue		Bond Discount Amortization		Carrying Amount of Bonds
1/1/20		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
1/1/21		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/22		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/23		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount

(c)		Prepare the journal entry for the interest revenue and discount amortization under the straight-line method at December 31, 2021.
(d)		Prepare the journal entry for the interest revenue and discount amortization under the effective-interest method at December 31, 2021.

(Round answers to 0 decimal places, e.g. 2,500. 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.)

No.	Account Titles and Explanation	Debit	Credit
(c)	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	enter a credit amount
(d)	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	enter a credit amount

Answer 1

Discount= $110000-99611= $10389

Cash received= $110000*9%= $9900

Bond Discount amortization= $10389/3= $3463

Interest revenue= Cash received+Bond Discount amortization

= $9900+3463= $13363

Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield
Date		Cash Received		Interest Revenue		Bond Discount Amortization		Carrying Amount of Bonds
1/1/20								$99611
1/1/21		$9900		$13363		$3463		(99611+3463)= 103074
1/1/22		9900		13363		3463		(103074+3463)= 106537
1/1/23		9900		13363		3463		(106537+3463)= 110000

Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method Bond Purchased to Yield
Date		Cash Received		Interest Revenue		Bond Discount Amortization		Carrying Amount of Bonds
1/1/20								$99611
1/1/21		$9900		(99611*13%)= 12949		(12949-9900)= 3049		(99611+3049)= 102660
1/1/22		9900		(102660*13%)= 13346		(13346-9900)= 3446		(102660+3446)= 106106
1/1/23		9900		(106106*13%)= 13794		(13794-9900)= 3894		(106106+3894)= 110000

No.	Account Titles and Explanation	Debit	Credit
(c)	Cash	$9900
	Held to maturity securities	$3463
	Interest revenue		$13363
(d)	Cash	$9900
	Held to maturity securities	$3446
	Interest revenue		$13346