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On January 1 of this year, Houston Company issued a bond with a face value of $10,000 and a coupon rate of 5 percent. The
On January 1 of this year, Houston Company issued a bond with a face value of $10,000 and a coupon rate of 5 percent. The bond matures in three years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 4 percent. Houston uses the effective-interest amortization method.
Required:
1. Complete a bond amortization schedule for all three years of the bonds life.
2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2?
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