Prepare entries necessary to classify the amounts into proper accounts

Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.Feb. 1, 2012

Sharapova Company common stock, $100 par, 200 shares $ 37,400

April 1  U.S. government bonds, 11%, due April 1, 2022, interest payableApril 1 and October 1, 110 bonds of $1,000 par each                                                                                                                                     $ 110,000

July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2012,purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2032                                               $ 54,000

Instructions

(Round all computations to the nearest dollar.)(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all thesecurities are classified as available-for-sale.(b) Prepare the entry to record the accrued interest and the amortization of premium on December31, 2012, using the straight-line method.(c) The fair values of the investments on December 31, 2012, were:

Sharapova Company common stock                  $ 31,800

U.S. government bonds                                        $ 124,700

McGrath Company bonds                                     $ 58,600

SOLUTION

(a) Debt Investments (Available-for-Sale) ………………………….162,000*

Equity Investments (Available-for-Sale) …………………………..37,400

Interest Revenue ($50,000 X .12 X 4/12) …………………………. 2,000

Investments …………………………………………………………………… 201,400*[$110,000 + ($50,000 X 1.04)]

(b)

December 31, 2012

Interest Receivable …………………………………………………………..8,025

Debt Investments (Available-for-Sale) ……………………………… 51

Interest Revenue…………………………………………………………….. 7,974

[Accrued interest[$50,000 X .12 X 10/12 = $5,000

Premium amortization

6/236 X $2,000 = (51)

Accrued interest[$110,000 X .11 X 3/12 = 3,025

 

All I need to know is how they these numbers for

 

Premium amortization 6/236? 

6/236 because I don’t understand how they got those numbers McGrath Company 12% bonds, par $50,000, dated March 1, 2012,

purchased at 104 plus accrued interest, interest payableannually on March 1, due March 1, 2032

…………………………….

54,000