Exercise 17-3 On January 1, 2017, Cheyenne Company purchased 8% bonds having a m
ID: 2402506 • Letter: E
Question
Exercise 17-3
On January 1, 2017, Cheyenne Company purchased 8% bonds having a maturity value of $280,000, for $303,589.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Cheyenne Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Date
Account Titles and Explanation
Debit
Credit
Schedule of Interest Revenue and Bond Premium Amortization
Effective-Interest Method
Date
Cash
Received
Interest
Revenue
Premium
Amortized
Carrying Amount
of Bonds
Date
Account Titles and Explanation
Debit
Credit
Date
Account Titles and Explanation
Debit
Credit
On January 1, 2017, Cheyenne Company purchased 8% bonds having a maturity value of $280,000, for $303,589.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Cheyenne Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Explanation / Answer
Date General Journal Debit Credit 01/01/2017 Debt Investments (Held-to-Maturity) 303,589.66 Cash 303,589.66 Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method 8% Bonds Sold to Yield 6% Date Cash Received Interest Revenue Premium Amortization Carrying Amountof Bonds 01/01/2017 0 0 0 303,589.66 01/01/2018 22400 18215.38 4184.62 299405.04 01/01/2019 22400 17964.30 4435.70 294969.34 01/01/2020 22400 17698.16 4701.84 290267.50 01/01/2021 22400 17416.05 4983.95 285283.55 01/01/2022 22400 17117.01 5282.99 280000 Date General Journal Debit Credit Dec 31 2017 Cash 22400 Debt Investments (Held-to-Maturity) 4184.62 Interest Revenue 18215.38 Dec 31 2018 Cash 22400 Debt Investments (Held-to-Maturity) 4435.70 Interest Revenue 17964.30
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