Exercise 17-4 On January 1, 2017, Carla Company purchased 11% bonds, having a ma

Question

Exercise 17-4

On January 1, 2017, Carla Company purchased 11% bonds, having a maturity value of $313,000, for $337,348.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Carla Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

Explanation / Answer

Note :

Schedule for Premium Amortized for Dec 17 & Dec 18

Interest receivable

A = $313,000 * 11 %

Interest Revenue

B = Previous row balance in ' D' * 9%

Premium Amortized

C = A- D

Carrying Amount

D =  Previous row balance - C

Answer

Unrealized Holding Gain or Loss - Equity

[335,100 - 333,280.13]

Unrealized Holding Gain or Loss - Equity

[ (321,600 - 328,845.34) + 1,819.87 ]

Date

Interest receivable

A = $313,000 * 11 %

Interest Revenue

B = Previous row balance in ' D' * 9%

Premium Amortized

C = A- D

Carrying Amount

D =  Previous row balance - C

Jan 1, 2017 337,348.74 Dec 31,2017 34,430 30,361.39 4,068.61 333,280.13 Dec 31,2018 34,430 29995.21 4434.79 32,8845.34

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