E16.2 (LO1) Entries for Held-to-Maturity Securities
On January 1, 2025, Dagwood Company purchased bonds at par. They are dated January 1, 2025, and
mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in the
held-to-maturity category. Additional information on the bonds follows.
Maturity value of bonds $ 300,000
Stated interest rate 6%
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare the journal entry to record the interest revenue on December 31, 2025.
c. Prepare the journal entry to record the interest received on January 1, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
a. 2025 Debit Credit
1/1
b. 2025 Debit Credit
12/31
c. 2026 Debit Credit
1/1
,Solution: E16.2 (LO1) Entries for Held-to-Maturity Securities
On January 1, 2025, Dagwood Company purchased bonds at par. They are dated January 1, 2025, and
mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in
the held-to-maturity category. Additional information on the bonds follows.
Maturity value of bonds $ 300,000
Stated interest rate 6%
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare the journal entry to record the interest revenue on December 31, 2025.
c. Prepare the journal entry to record the interest received on January 1, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
a. 2025 Debit Credit
1/1 Debt Investments 300,000
Cash 300,000
b. 2025 Debit Credit
12/31 Interest Receivable 18,000
Interest Revenue 18,000
c. 2026 Debit Credit
1/1 Cash 18,000
Interest Receivable 18,000
,E16.5 (LO 1) Effective-Interest versus Straight-Line Bond Amortization
On January 1, 2025, Phantom Company acquired bonds of Spiderman Products, Inc. Additional
information concerning the bond investment follows.
Par value of bonds acquired $ 200,000
Acquisition cost $ 185,589
Stated rate of bonds 9%
Expected yield for Phantom Company 12%
The interest is received on January 1 of each year, and the bonds mature January 1, 2028. The bonds
are classified as held-to-maturity.
Instructions
a. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying
the straight-line method.
b. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying
the effective-interest method.
c. Prepare the journal entry for the interest revenue and the discount amortization under the
straight-line method at December 31, 2026.
d. Prepare the journal entry for the interest revenue and the discount amortization under the
effective-interest method at December 31, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
a. Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method
9% Bond Purchased to Yield 12%
Bond Carrying
Cash Interest Discount Amount
Date Received Revenue Amortization of Bonds
, b. Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method
9% Bond Purchased to Yield 12%
Bond Carrying
Cash Interest Discount Amount
Date Received Revenue Amortization of Bonds
c. Debit Credit
12/31/26
d. Debit Credit
12/31/26
On January 1, 2025, Dagwood Company purchased bonds at par. They are dated January 1, 2025, and
mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in the
held-to-maturity category. Additional information on the bonds follows.
Maturity value of bonds $ 300,000
Stated interest rate 6%
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare the journal entry to record the interest revenue on December 31, 2025.
c. Prepare the journal entry to record the interest received on January 1, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
a. 2025 Debit Credit
1/1
b. 2025 Debit Credit
12/31
c. 2026 Debit Credit
1/1
,Solution: E16.2 (LO1) Entries for Held-to-Maturity Securities
On January 1, 2025, Dagwood Company purchased bonds at par. They are dated January 1, 2025, and
mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in
the held-to-maturity category. Additional information on the bonds follows.
Maturity value of bonds $ 300,000
Stated interest rate 6%
Instructions
a. Prepare the journal entry at the date of the bond purchase.
b. Prepare the journal entry to record the interest revenue on December 31, 2025.
c. Prepare the journal entry to record the interest received on January 1, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
a. 2025 Debit Credit
1/1 Debt Investments 300,000
Cash 300,000
b. 2025 Debit Credit
12/31 Interest Receivable 18,000
Interest Revenue 18,000
c. 2026 Debit Credit
1/1 Cash 18,000
Interest Receivable 18,000
,E16.5 (LO 1) Effective-Interest versus Straight-Line Bond Amortization
On January 1, 2025, Phantom Company acquired bonds of Spiderman Products, Inc. Additional
information concerning the bond investment follows.
Par value of bonds acquired $ 200,000
Acquisition cost $ 185,589
Stated rate of bonds 9%
Expected yield for Phantom Company 12%
The interest is received on January 1 of each year, and the bonds mature January 1, 2028. The bonds
are classified as held-to-maturity.
Instructions
a. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying
the straight-line method.
b. Prepare a 3-year schedule of interest revenue and bond discount amortization, applying
the effective-interest method.
c. Prepare the journal entry for the interest revenue and the discount amortization under the
straight-line method at December 31, 2026.
d. Prepare the journal entry for the interest revenue and the discount amortization under the
effective-interest method at December 31, 2026.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
a. Schedule of Interest Revenue and Bond Discount Amortization Straight-line Method
9% Bond Purchased to Yield 12%
Bond Carrying
Cash Interest Discount Amount
Date Received Revenue Amortization of Bonds
, b. Schedule of Interest Revenue and Bond Discount Amortization Effective-Interest Method
9% Bond Purchased to Yield 12%
Bond Carrying
Cash Interest Discount Amount
Date Received Revenue Amortization of Bonds
c. Debit Credit
12/31/26
d. Debit Credit
12/31/26
