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Question 2

Presented below is an amortization schedule related to Skysong Companys 5-year, $120,000 bond with a 6% interest rate and a 3% yield, purchased on December 31, 2015, for $136,487.

Date		Cash Received		Interest Revenue		Bond Premium Amortization		Carrying Amount of Bonds
12/31/15								$136,487
12/31/16		$7,200		$4,095		$3,105		133,382
12/31/17		7,200		4,001		3,199		130,183
12/31/18		7,200		3,905		3,295		126,888
12/31/19		7,200		3,807		3,393		123,495
12/31/20		7,200		3,705		3,495		120,000

The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end:

		12/31/16		12/31/17		12/31/18		12/31/19		12/31/20
Amortized cost		$133,382		$130,183		$126,888		$123,495		$120,000
Fair value		$132,800		$132,300		$128,700		$124,700		$120,000

(a)		Prepare the journal entry to record the purchase of these bonds on December 31, 2015, assuming the bonds are classified as held-to-maturity securities.
(b)		Prepare the journal entry related to the held-to-maturity bonds for 2016.
(c)		Prepare the journal entry related to the held-to-maturity bonds for 2018.
(d)		Prepare the journal entry to record the purchase of these bonds, assuming they are classified as available-for-sale.
(e)		Prepare the journal entries related to the available-for-sale bonds for 2016.
(f)		Prepare the journal entries related to the available-for-sale bonds for 2018.

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