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On February 1, 2010, Pyle Inc. had excess cash on hand. The controller suggested to management that the company buy $200,000 of U.S. Treasury 8%
On February 1, 2010, Pyle Inc. had excess cash on hand. The controller suggested to management that the company buy $200,000 of U.S. Treasury 8% bonds selling at 102. Interest payments on these bonds are made semiannually on January 1 and July 1. (1) Prepare entries using the revenue approach to record: a. the February purchase of U.S. Treasury bonds (including accrued interest) b. the collection of interest on July 1 c. the accrual of interest on December 31 (2) Assuming that these bonds were acquired as an investment in trading securities, explain whether the premium or discount should be amortized.
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