Exercise 17-5 On January 1, 2017, Sarasota Company acquires $210,000 of Spiderma

Question

Exercise 17-5 On January 1, 2017, Sarasota Company acquires $210,000 of Spiderman Products, Inc., 990 bonds at a price of $199,736. Interest is received on January 1 of each year, and the bonds mature on January 1, 2020. The investment will provide Sarasota Company a 11% 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 o decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield Cash Interest Bnd Discount Carrying Amount Revenue Amortization Date Received of Bonds 1/1/20

Explanation / Answer

Striaght line method Date Cash interest bond dis CV Received revenue amortized 1/1/2017 199,736 1/1/2018 18900 22321 3421 203,157 1/1/2019 18900 22321 3421 206,579 1/1/2020 18900 22321 3421 210,000 cash received = 210000*9% 18900 discount amortized = (10264/3) 3421 Effective interest method Date Cash interest bond dis CV Received revenue amortized 11% 1/1/2017 199,736 1/1/2018 18900 21971 3071 202,807 1/1/2019 18900 22309 3409 206,216 1/1/2020 18900 22684 3784 210,000 no Account titles & Explantions Debit Credit c) interest receivable 18900 discount on bonds payable 3421 interest income 22321 d) interest receivable 18900 discount on bonds payable 3071 interest income 21971

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