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    Bond Discount Amortization Using Straight-Line and Effective Interest Methods

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    Bond Investment Discount Amortization Schedule

    Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2013. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2016.

    1. Prepare two investment interest income and discount amortization schedules using 1) straight-line method and 2) effective interest method

    2. Prepare the July 1, 2015 journal entries to record the interest income under both methods - Use an excel spreadsheet.

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    Solution Preview

    Please see the attached Excel 97-2003 spreadsheet.

    NOTE: Some textbooks do not break out the Discount on Bond ...

    Solution Summary

    This solution illustrates how to compute and record amortization of a discount on a bond investment and receipt of cash interest income on that investment using the straight-line and effective interest methods.