Question
On January 1, 2014, Novotna Company purchased $405,800, 6% bonds of Aguirre Co. for $357,636. The bonds were purchased to yield 9% interest. Interest is
On January 1, 2014, Novotna Company purchased $405,800, 6% bonds of Aguirre Co. for $357,636. The bonds were purchased to yield 9% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2019. Novotna Company uses the effective-interest method to amortize discount or premium. On January 1, 2016, Novotna Company sold the bonds for $359,228 after receiving interest to meet its liquidity needs. Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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