(Debt Securities) Presented below is an amortization schedule related to Kathy Baker Company

with a 7% interest rate and a 5% yield, purchased on December 31, 2004, for $108,660

Cash Interest Bond Premium

Date Received Revenue Amortization
12/31/2004
12/31/2005 $7,000 $5,433 $1,567
12/31/2006 7,000 5,354 1,646
12/31/2007 7,000 5,272 1,728
12/31/2008 7,000 5,186 1,814
12/31/2009 7,000 5,095 1,905

The following schedule presents a comparison of the amortized cost and fair value of the bonds

12/31/2005 12/31/2006
Amortized cost $107,093 $105,447
Fair value $106,500 $107,500

Instructions

(a) Prepare the journal entry to record the purchase of these bonds on December 31, 2004, ass
are classified as held-to-maturity securities.

Dec. 31, 2004 Held-to-maturity securities

Cash

(b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2005.

Dec. 31, 2005 Cash

Held-to-maturity securities
Interest Revenue

(c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2007.

Dec. 31, 2007 Cash

Held-to-maturity securities
Interest Revenue

(d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are clas
available-for-sale.
Dec. 31, 2004 Available-for-sale securities
Cash

(e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2005.

Dec. 31, 2005 Cash

Available-for-sale securities
Interest Revenue

Dec. 31, 2005 Unrealized Holding Gain or Loss—Equity

Securities Fair Value Adjustment (AFS)

(f) Prepare the journal entry(ies) related to the available-for-sale bonds for 2007.

Dec. 31, 2007 Cash

Available-for-sale securities
Interest Revenue

Dec. 31, 2007 Securities Fair Value Adjustment (AFS)

Unrealized Holding Gain or Loss—Equity
e related to Kathy Baker Company’s 5-year, $100,000 bond
er 31, 2004, for $108,660

Carrying Amount
of Bonds
$108,660
107,093
105,447
103,719
101,905
100,000

ed cost and fair value of the bonds at year-end.

12/31/2007 12/31/2008 12/31/2009

$103,719 $101,905 $100,000
$105,650 $103,000 $100,000

bonds on December 31, 2004, assuming the bonds

108,660
108,660

ty bonds for 2005.

7,000
1,567
5,433

ty bonds for 2007.

7,000
1,728
5,272

ese bonds, assuming they are classified as

 108,660
108,660

sale bonds for 2005.

7,000
1,567
5,433

593
593

ale bonds for 2007.

7,000
1,728
5,272

1,931
oss—Equity 1,931