[wishiwasaCPA]

Here is the question:

On October 1, Year 1, Park Co. purchased 200 of the $1,000 face value, 10% bonds of Ott, Inc., for $220,000, including accrued interest of $5,000. The bonds, which mature on January 1, Year 8, pay interest semiannually on January 1 and July 1. Park used the straight-line method of amortization under U.S. GAAP and appropriately recorded the bonds as a long-term investment. On Park’s December 31, Year 2 balance sheet, the bonds should be reported at…

the answer is $212,000 with the bond purchase price of $220,000, accrued interest (5,000) for 215,000 then amortization of $3,000 which is calculation $15,000 *15/75. My question is where is this random 15/75 coming from? My materials do not explain it at all.

[musicamor]

15 is the number of months that have elapsed between Oct 1, year 1, Dec 31, year 2. The 75 months is maturity period of the bonds, from 10/1/X1 – 1/1/X1. Make sense?

Texas CPA - licensed in 2012!!!

[musicamor]

15 is the number of months that have elapsed between Oct 1, year 1, Dec 31, year 2. The 75 months is maturity period of the bonds, from 10/1/X1 – 1/1/X1. Make sense?

Texas CPA - licensed in 2012!!!

[Author]

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