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Intermediate Accounting II Chapter 17

This document contains an accounting assignment with examples of recording debt investments at amortized cost using the effective interest method. 1) It shows the schedule of interest revenue and bond premium amortization for bonds with a 12% stated rate but sold to yield 10%. 2) It provides journal entries to record interest receivable, interest revenue, and bond premium amortization. 3) It includes a fair value adjustment entry for the bonds at the end of 2019 and the calculation of an unrealized gain/loss at the end of 2020.

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izza zahratunnisa
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309 views2 pages

Intermediate Accounting II Chapter 17

This document contains an accounting assignment with examples of recording debt investments at amortized cost using the effective interest method. 1) It shows the schedule of interest revenue and bond premium amortization for bonds with a 12% stated rate but sold to yield 10%. 2) It provides journal entries to record interest receivable, interest revenue, and bond premium amortization. 3) It includes a fair value adjustment entry for the bonds at the end of 2019 and the calculation of an unrealized gain/loss at the end of 2020.

Uploaded by

izza zahratunnisa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Izza Zahratunnisa

Intermediate Accounting II 2020 IUP


19/438318/EK/22150

Assignment 3
E17-3:

a.

January 1 2019

Debt investments 322,744.44

Cash 322,744.44

b.
Schedule of Interest Revenue and Bond Premium Amortisation
Effective-Interest Method
12% Bonds Sold to Yield 10%

Date Cash Received Interest Revenue Premium Carrying Amount of


Amortised Bonds

1/1/19 - - - $322,744.44

1/1/20 $36,000 $32,274.44 $3,725.56 319,018.88

1/1/21 $36,000 31,901.89 4,098.11 314,920.77

1/1/22 $36,000 31,492.08 4,507.92 310,412.85

1/1/23 $36,000 31,041.29 4,958.71 305,454.14

1/1/24 $36,000 30,545.86 5,454.14 300,000.00

c.

December 21, 2019

Interest Receivables 36,000

Debt investments 3,725.56

Interest Revenue 32,274.44

d.

December 31, 2020

Interest Receivables 36,000

Debt investments 4,098.11

Interest Revenue 31,901.89


Izza Zahratunnisa
Intermediate Accounting II 2020 IUP
19/438318/EK/22150

E17-4:

a.

January 1, 2019

Debt investments 322,744.44

Cash 322,744.44

b.

December 31, 2019

Interest Receivables 36,000

Debt investments 3,725.56

Interest revenue 32,724.44

Fair value adjustments 1,481.12

Held gain or loss — Equity 1,481.12

c.

December 31, 2020

Held gain or loss — Equity 7,401.89

Fair value adjustment 7,401.89

Amortised Cost Fair Value Unrealised Gain/Loss

Available-for-sale bonds $314,920.77 $309,000.00 $(5,920.77)

Previous fair value 1,481.12


adjustments (debit)

Fair value adjustment $(7,401.89)


(credit)

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