PROBLEM 2

1)
Acquisition Cost 941726
Face Amount 1000000
Discount -58274

2)
Acquisition Cost 1075939
Face Amount 1000000
Premium 75939

9)
Transaction Cost 80000
Cost 827135 907135
Face Amount 1000000
Discount -92865
10)
Sale Price 900000
Purchased Interest 50000
Sale price excluding interest
(Net proceeds) 850000
Carrying amount
July 1 20x2 949523.27
Loss on sale -99523.27

13)
Present Value Dec 31, 20x1 106106.56
Interest Receivable Dec 31 20x1 10000
Carrying amount Dec 31 20x1 96106.56
14)
Transaction Cost 80000
Cost 827135 907135
Face Amount 1000000
Discount -92865
a. AMORTIZATION TABLE
DATE INTEREST RECEIVED INTEREST INCOME
Jan 1 20x1
Jan 1 20x2 120000 131841.64
Jan 1 20x3 120000 133499.47
Jan 1 20x4 120000 135389.40
Jan 1 20x5 120000 137543.91

b. DISCOUNT 15389.40+17543.91

c. JOURNAL ENTRIES

Jan 1 20x1 Investment in bonds at amortized cost

Cash
Dec 31 20x1 Interest receivable
Investment in bonds at amortized cost
Interest Income
Jan 1 20x2 Cash
Interest receivable
Dec 31 20x2 Interest receivable
Investment in bonds at amortized cost
Interest Income

a. AMORTIZATION TABLE
DATE INTEREST RECEIVED INTEREST INCOME
Jan 1 20x1
Jan 1 20x2 120000 96835
Jan 1 20x3 120000 147388
Jan 1 20x4 120000 143554

a. AMORTIZATION TABLE
DATE INTEREST RECEIVED INTEREST INCOME
Jan 1 20x1
Dec 31 20x1 100000 126998.9
Dec 31 20x2 100000 130778.75
Dec 31 20x3 100000 135087.77

DISCOUNT

b. JOURNAL ENTRIES

Jan 1 20x1 Investment in bonds at amortized cost

 Cash
Dec 31 20x1 Cash
Investment in bonds at amortized cost
Interest Income
Dec 31 20x2 Cash
Investment in bonds at amortized cost
Interest Income
Dec 31 20x3 Cash
Investment in bonds at amortized cost
Interest Income
Dec 31 20x3 Cash
Investment in bonds at amortized cost

a. AMORTIZATION TABLE
DATE INTEREST RECEIVED INTEREST INCOME
Jan 1 20x1
Dec 31 20x1 100000 126998.9
July 2 20x2 50000 65389.37

b. JOURNAL ENTRIES
July 2 20x2 Interest receivable 50000
Investment in bonds at amortized cost 15389.37
Interest Income
July 2 20x2 Cash 900000
Loss on sale of securities 99523.27
Investment in bonds at amortized cost
Interest receivable

AMORTIZATION TABLE
DATE INTEREST INCOME PRESENTVALUE
Jan 1 20x1 94738
Dec 31 20x1 11368.56 106106.56
Dec 31 20x2 12732.7872 118839.35
Dec 31 20x3 14260.721664 133100.07

a. AMORTIZATION TABLE
DATE INTEREST INCOME PV OF CASH FLOW
Jan 1 20x1 94738
Dec 31 20x1 11368.56 106106.56
Dec 31 20x2 12732.7872 118839.3472
Dec 31 20x3 14260.721664 133100.068864

a. AMORTIZATION TABLE
DATE INTEREST RECEIVED INTEREST INCOME
Jan 1 20x1
Dec 31 20x1 100000 126998.9
Dec 31 20x2 100000 130778.75
Dec 31 20x3 100000 135087.77
AMORTIZATION PRESENTVALUE
941726.00
11841.64 953567.64
13499.47 967067.11
15389.40 982456.50
17543.91 1000000.42

32933.31

941726
941726
1200000
11841.64
131841.64
120000
120000
120000
13499.47
133499.47

AMORTIZATION PRESENTVALUE
1075939
23165 1052774
27388 1025385
23554 1001831

AMORTIZATION PRESENTVALUE
907135.00
26998.90 934133.90
30778.75 964912.65
35087.77 1000000.42

92865.42

907135
 907135
100000
26998.90
126998.9
100000
30778.75
130778.75
100000
35087.77
135087.77
1000000
1000000

AMORTIZATION PRESENTVALUE
907135.00
26998.90 934133.90
15389.37 949523.27

65389.37

949523.27
50000

INTEREST RECEIVABLE AMORTIZATION PRESENT VALUE

94738
10000.00 1368.56 96106.56
11000.00 1732.79 97839.35
 12100.00 2160.72 100000.07

AMORTIZATION PRESENTVALUE
907135.00
26998.90 934133.90
30778.75 964912.65
35087.77 1000000.42