Investment Discount Amortization schedule on January 1, 2016, Rodgers Company va

Question

Investment Discount Amortization schedule on January 1, 2016, Rodgers Company value, 10%, 3 years bonds for 5190, 165.35, a price that yields a 12% effective annual interest rate interest semi annually on June 30 and December 31. Required: Record the purchase of the bonds. Prepare an investment interest income and discount amortization schedule using the effective interest method Record the receipts of the interests on June 30, 2016, and June 30, 2018. Investment premium Amortization schedule On January 1, 2016, Lynch company acquired 13% bonds with a face valu of $50,000. The bonds pay interest on June 30 and December 31, 2018 Lynch paid $51,229.35, a price that yields a 12% annual interest rate. Record the purchase of bonds. Prepare an investment interest income and discount amortization schedule using the effective interest method. Record the receipts of the interests on June 30, 2016, and June 30, 2018.

Explanation / Answer

Purchase of the Bond: Debit Credit Cash Dr             50,000    To Bond Payable             50,000 Investment Income Account Particulars Interest @12% Interest for 2016               6,000 Interest for 2017               6,000 Interest for 2018               6,000 Total             18,000 Interest Income Recorded: Cash             18,000    To Interest Income             18,000

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