Problem 20-2

Requirement 1 Discount Carrying

Date Interest received Interest Income Amortization Amount
01/01/2019 4,742,000
12/31/2019 300,000 379,360 79,360 4,821,360
12/31/2020 300,000 385,709 85,709 4,907,069
12/31/2021 300,000 392,931 92,931 5,000,000

Requirement 2
2019 Debit Credit
Jan 01 Investments in bonds 4,742,000
Cash 4,742,000

Dec 31 Cash 300,000

Interest income 300,000
Dec 31 Investment in bonds 79,360
Interest income 79,360
2020
Dec 31 Cash 300,000
Interest income 300,000
Dec 31 Investment in bonds 85,709
Interest income 85,709
Dec 31 Cash 5,500,000
investment in bonds 4,907,069
Gain on sale of bond investment 592,931

Sale Price 5,500,000

Carrying Amount-12/31/2020 4,907,069
Gain on sale 592,931