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Mercer Corporation acquired $400,000 of Park Companys bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest
Mercer Corporation acquired $400,000 of Park Companys bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021.
Required:
1. | Prepare an investment interest income and premium amortization schedule, using the: |
a. | straight-line method |
b. | effective interest method |
2. | Prepare journal entries to record the December 31, 2018, and December 31, 2020, interest receipts using both methods. |
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