Question
On january 1, 2019, Potter incorporate sold a 5-year, $500,000 bond with a stated rate of 5% for $450,675. The market interest rate at the
On january 1, 2019, Potter incorporate sold a 5-year, $500,000 bond with a stated rate of 5% for $450,675. The market interest rate at the time was 6%. Interest is paid semi-annually on June 30 and December 31. Potter incorporated, a public company, uses the effective-interest method of amortization for bonds. Round the whole numbers, no decimal places.
Prepare the journal entry that Potter Incorporated will make on December 31, 2019 when it makes its interest to the bondholders. (Hint: this is the second interest payment, and an amortization schedule using the effective interest method may be helpful) Show your calculations.
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