On January 1, Year 1, Montgomery Manufacturing paid $556,742.69 for 10% bonds with a face value of $600,000.They are dated January 1, Year 1, and mature on January 1, Year 6, with interest receivable annually on December 31. Montgomery uses ASPE and applies the amortized cost approach using the effective interest method and has a December31 year end.

Required:

a)Prepare the journal entry to record the bond purchase.

b)Prepare a bond amortization schedule, rounding to two decimal places.

c)In your own words, why might potential investors find the effective interest method more relevant than straight-line method?

d)In your own words, briefly explain what it means to manage an investment on the basis of yield-to-mature.