No cash has bee n received yet cos interest is payable jan 1 of the following year therefore best to recognize interest receivable for the 6 month period.Interest income earned by the company is only  for 6 months cos it is acquired july 1 1992.Not sure if this is correct though.i myself is searching for answer..

Divya,

I don't see anything wrong with your table. I think the excess amount would have to be amortized during the last year. But I am not very sure.

Thanks

Thanks a lot again, Sanjana ! I have mailed Becker Academic support just now.... In case I get an update, I would post it....

Only 2 days left and I am thinking too much :)

Divya I think that because the bond was issued in July 1, you will have to put a semi-annual component in your calculations, i.e. every year should be split as July-Dec and Jan-Jun using the yield of 5% and interest of 4% for each calculation. If you do that and you also take into account that there is one day in Jan 1999 then the amortization column equals approx. 94,000 which in this case is also the discount. It will only leave 66 dollars residual but I think this is immaterial and could be due to roundings. But let's see what Becker replies because I'm not sure about my thoughts.

By the way I think that the entry at Dec 31, 1992 should be

DR accrued interest receivable 80,000 (40,000 from the issuance+40,000 for the 6 months after)

DR Investment in Bond 5,300

CR Interest earned 85,300

Cash will be DR next year when the interest receivable will be collected.