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On January 1, 2016, on their issue date, Diogenes Inc. purchased 9%, $200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the
On January 1, 2016, on their issue date, Diogenes Inc. purchased 9%, $200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective interest method for amortizing premium or discount. The current market rate was 10% and as a result Diogenes paid $187,711 for the bonds. On December 31, 2016, the bonds have a market value of $185,000.
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a) Record the receipt of interest and amortization of the discount for 2014.
b) Record any year-end adjustment required.
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