On December 31, 2020, when the market interest rate is 6 percent, Elle Corporation purchases $5,000,000 of Belmont Products Inc.’s six-year, 5.5 percent bonds at issuance for $4,875,575. Interest is payable semi-annually. Elle Corporation plans to hold these bonds to maturity.

Required

1. Prepare a schedule for amortizing the discount on the bond investment through December 31, 2021. Elle Corporation uses the effective-interest amortization method. Use Try It! 6 on page 910 as a guide to create the schedule.

2. Journalize the purchase on December 31, 2020, the first semi-annual interest receipt on June 30, 2021, and the year-end interest receipt on December 31, 2021.