On January $1,2020,$ Novotna Company purchased $$500,000,10\%$ bonds of Aguirre Co$.$ for $$526,209.$ The bonds were purchased to yield $8\%$ interest. Interest is payable semiannually on July $1$ and January $1.$ The bonds mature on January $1,2023.$ Novotna Company uses the effective$-$interest method to amortize discount or premium. On July $1,2022,$ Novotna Company sold the bonds for $$501,805$ after receiving interest to meet its liquidity needs.

a$.$ Prepare the journal entry to record the purchase of bonds on January $1.$ Assume that the bonds are classified as available for sale.

Debt investment

Cash

$526,209$

$526,209$

b$.$ Prepare the amortization schedule for the bonds.

$FV=500,000$

Issue price $=526,209$

Coupon rate $=10\frac{\%}{2}=5\%$

Market rate $=8\%=4\%$

Cash interest received $=500,0005\%$

$=25,000$

Unamortized Premium $=526,209-500,000$

$=26,209.$

$\backslash$table$[[$Date$,\backslash$table$[[$Cash$],[$Received$]],\backslash$table$[[$Interest$],[$Revenue$]],\backslash$table$[[$Amortized$],[$Premium$]],\backslash$table$[[$Unamortized$],[$Premium$]],\backslash$table$[[$Carrying$],[$Amount$]]],[\frac{1}{1}\frac{?}{2020},,,,26,209,526,209],[\frac{1}{7}\frac{?}{2020},25,000,21,048,3,952,,532,519],[\frac{31}{12}\frac{?}{2020},25,000,26626,6,626,,539,145],[\frac{1}{7}\frac{?}{2021},25,000,26957,6,957,,546,103],[\frac{21}{1}\frac{n}{2}n-1,2500,272n5,72n5,,552$ Ano$]]$