P17-1 - 5. Prepare the journal entry(ies) related to the...

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P17-1 (Debt Securities) Presented below is an amortization schedule related to Kathy Baker Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2004, for $108,660. Date Cash Received Bond Premium Amortiza tion Carrying Amount of Bonds 12/31/2004 $108,660 12/31/2005 $7,000 $1,567 107,093 12/31/2006 7,000 1,646 105,447 12/31/2007 7,000 1,728 103,719 12/31/2008 7,000 1,814 101,905 12/31/2009 7,000 1,905 100,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/2005 12/31/20 07 12/31/2008 12/31/2009 Amortized cost $107,093 $103,719 $101,905 $100,000 Fair value $106,500 $105,650 $103,000 $100,000 Instructions 1. Prepare the journal entry to record the purchase of these bonds on December 31, 2004, assuming the bonds are classi 2. Prepare the journal entry(ies) related to the held-to-maturity bonds for 2005. 3. Prepare the journal entry(ies) related to the held-to-maturity bonds for 2007. 4. Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-for-sale
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Unformatted text preview: 5. Prepare the journal entry(ies) related to the available-for-sale bonds for 2005. 6. Prepare the journal entry(ies) related to the available-for-sale bonds for 2007. a) 12/31/2004 Held-to-maturity securities 108,660 Cash 108,660 b) 12/31/2005 Cash 7,000 Interest Revenue 5,433 Held-to-Maturity Securities 1,567 c) Dec. 31, 2007 Cash 7,000 Held-to-Maturity 1,728 Securities Interest Revenue 5,272 d) Dec. 31, 2004 Available-for-Sale Securities 108,660 Cash 108,660 e) 12/31/2005 Cash 7,000 Available-For-Sale Securities 1,567 Interest Revenue 5,433 Unrealized Holding Gain or Loss - Equity Securities Fair Value Adjustment (Available-for-sale) f) 12/31/2007 Cash 7,000 Available-For-Sale Securities 1,728 Interest Revenue 5,272 Securities Fair Value Adjustment (Available-for-sale) Unrealized Holding Gain or Loss - Equity 1,931...
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P17-1 - 5. Prepare the journal entry(ies) related to the...

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