E17-5 On January 1, 2013, Phantom Company acquires $200,000 of Spiderman Products, Inc. 9% bonds at a price of $185,589

E17-5 (Effective-Interest versus Straight-Line Bond Amortization) On January 1, 2013, Phantom Company acquires $200,000 of Spiderman Products, Inc. 9% bonds at a price of $185,589 The interest is payable each December 31, and the bonds mature December 31, 2015. The investment will provide Phantom Company a 12% yield. The bonds are classified as held-to-maturity.

Note: Due to significant digits and rounding, there may be slight differences in values.

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 receipt of December 31, 2014, and the discount
amortization under the straight-line method.

(d) Prepare the journal entry for the interest receipt of December 31, 2014, and the discount
amortization under the effective-interest method.