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On January 1, 20X1, Levan Company issued bonds with a coupon rate of 10% (with interest paid once a year) and a face amount of
On January 1, 20X1, Levan Company issued bonds with a coupon rate of 10% (with interest paid once a year) and a face amount of $200,000. The bonds mature in 15 years. The market interest rate for bonds with the same degree of riskiness is 8% compounded annually. These bonds were issued on January 1, 20X1 at a price of $234,238. Coupon payments are made annually on December 31, so the first coupon payment was made on December 31, 20X1. Levan uses the effective-interest method on its books. Which one of the following is included in the journal entry on Levan's books to record the SECOND coupon payment made on December 31, 20X2? CREDIT to Discount on Bonds of $1,261 DEBIT to Interest Expense of $18,739 DEBIT to Premium on Bonds of $1,362 DEBIT to Interest Expense of $20,000
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