Answer:
Debt securities 328,000.00 debit
premium on Debt securities 25.515,61 debit
Cash 353,515.61 credit
cash 36,080 debit
premium on Debt securities 4,263.6 credit
interest revenue 36,080 credit
unrealized loss 14.547,99 debit
premium on debt securities 21.252,01 debit
discount on debt securities 35,800 credit
unrealized loss 10.782 debit
discount on debt securities 10.782 credit
Explanation:
interest will be carrying value times market rate:
353,515.61 x 9% = 31.816,40 interest
cash proceed 328,000 x 11% = 36,080
amortization on premium: 4.263,6
premium after proceeds:
25.515,61 - 4,263.6 = 21.252,01
Then, we adjust the bonds to the fair value against the premium
353,515.61 - 4,263.6 = 349.252,01
fair value as 2017 <u> 292,200 </u>
adjustment: 57,052.01
we will erase the premium and do a discount for:
328,000 - 292,200 = 35,800
we do the same process for 2018:
292,200 x 0.09 = 26.298
cash proceed 328,000 x 11% = 36,080
amortization on discount: 9,782
35,800 - 9,782 = 26.018
book value 292,200 + 9,782 = 301.982
fair value <u> 291,200</u>
additional discount on 10.782
we again have an unrealzied loss until we sale the bonds
