Question

Exercise 17-5 (Part Level Submission) On January 1, 2017, Metlock Company acquires $140,000 of Spiderman Products, Inc., 10% bonds at a price of $136,579. Interest is received on January 1 of each year, and the bonds mature on January 1, 2020. The investment will provide Metlock Company a 11% yield. The bonds are classified as held-to-maturity. ▼ (a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round answers to 0 decimal places, e.g. 2,500.) Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method Bond Purchased to Yield Cash Received Interest Revenue Bond Discount Carrying Amount Date Amortization of Bonds 1/1/20 SHOW LIST OF ACCOUNTS LINK TO TEXT Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

Bond issue price	$      1,36,579.00
Face value	$      1,40,000.00
Discount on bond	$            3,421.00
Number of Interest payments Received	4
Discount to be amortized per year	$               855.25
Interest on bond	$         14,000.00

Solution

Schedule of interest revenue and Bond Discount Amortization
Straight line Method
Bond Purchased to Yield
Date	Cash received	Bond discount amortization	Carrying value of Bonds
1/1/17	$   14,000	$    855	$ 1,37,434
1/1/18	$   14,000	$    855	$ 1,38,290
1/1/19	$   14,000	$    855	$ 1,39,145
1/1/20	$   14,000	$    855	$ 1,40,000