Exercise 17-3 (Part Level Submission) On January 1, 2013, Hi and Lois Company pu
ID: 2456678 • Letter: E
Question
Exercise 17-3 (Part Level Submission)
On January 1, 2013, Hi and Lois Company purchased 12% bonds having a maturity value of $323,900, for $348,456.42. The bonds provide the bondholders with a 10.00% yield. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
(a) and (b)
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
Exercise 17-3 (Part Level Submission)
On January 1, 2013, Hi and Lois Company purchased 12% bonds having a maturity value of $323,900, for $348,456.42. The bonds provide the bondholders with a 10.00% yield. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. Hi and Lois Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Explanation / Answer
Answer 1 Date Particulars Debit Credit Jan 1, 2013 Held to Maturity A/c Dr. $348,456.42 To Bank A/c $348,456.42 Answer 2 Schedule of Interest Revenue and Bond Premium Amortization Effective-Interest Method Date Cash Recd Interest Revenue Premium Amortized Carrying Amount of Bonds 1/1/13 $0 $348,456.42 12/31/13 $38,868 34,845.64 4,022.36 344,434.06 12/31/14 $38,868 34,443.41 4,424.59 340,009.47 12/31/15 $38,868 34,000.95 4,867.05 335,142.42 12/31/16 $38,868 33,514.24 5,353.76 329,788.66 12/31/17 $38,868 32,979.35 5,888.65 323,900.00
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