John and Martha Hitt Company purchased bonds to be held to maturity. The following details pertain:
Stated interest rate
Date of purchase
Interest receipts due
Method of amortization
January 1, 2017
January 1, 2014
Annually on January 1
(a) Compute the amount of purchase premium or discount.
(b) Prepare the journal entry for the purchase of the bonds. Do not record the premium or discount separately
in the accounts.
(c) Prepare the amortization schedule for these bonds.
(d) Prepare all of the journal entries (subsequent to the purchase date) for 2014 and 2015 that relate to these
bonds. Assume the accounting period coincides with the calendar year. Assume reversing entries are not used.
(e) Prepare the journal entry to record the sale of the bonds, assuming they are sold on January 1, 2016
for $102,000.00. Assume the sale occurs immediately after the annual interest receipt.