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On July 1, 2019, Smith purchased $60,000, 10%, 5-year bonds with interest payable on June 30 and December 31. Smith paid 55,584 for the bonds
On July 1, 2019, Smith purchased $60,000, 10%, 5-year bonds with interest payable on June 30 and December 31. Smith paid 55,584 for the bonds (effective interest rate of 12%). Using the effective interest method, Smith increased the Available-for-Sale Debt Investments account on December 31, 2019 by the amortized discount of $335. On December 31, 2019, the fair value of the bonds was $56,300. The entries on December 31, 2019 include a debit to Fair Value Adjustment for $700 O $381 $3.700 $335
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