ACC 545 Week 3 Individual Assignment

1. On January 1, 2006, Jamona Corp. purchased 12% bonds, having a maturity value of $300,000, for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2006, and mature January 1, 2011, with interest receivable December 31 of each year. The company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year is as follows: 2006 – $320,500 2007 – $309,000 2008 – $308,000 2009 – $310,000 2010 – $300,000

(a)                                                                      January 1, 2006

          Available-for-Sale Securities.......................................................          322,744.44

                    Cash....................................................................................                                     322,744.44

(b)                                                                  December 31, 2006

          Cash .................................................................................. 36,000

                    Available-for-Sale Securities.............................................                                         3,725.56

                    Interest Revenue ($322,744.44 X .10)..............................                                       32,274.44

          Securities Fair Value Adjustment

              (Available-for-Sale)..................................................................                1,481.12

                    Unrealized Holding Gain or Loss—

                        Equity ($320,500.00 – $319,018.88)..............................                                           1,481.12