Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight line amortization will be used rather than the effective interest method.

Data from A11-7

On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds mature on 30 June 20X5.

Required:

1. Calculate the price paid by New Company.

2. Construct a table that shows interest revenue reported by New Company, and the carrying value of the investment, for each interest period to maturity. Use the straight line method.

3. Give entries for the first three interest periods based on your calculations in requirement 2.