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On June 1 , 2 0 1 8 , the Rauch Corp. acquired $ 3 0 0 , 0 0 0 in 1 0 %
On June the Rauch Corp. acquired $ in year bonds at Acquisition costs of
$ were incurred on this purchase. These bonds, which were dated April pay interest semi
annually on April and October of each year. Any discount or premium on this bond investment is
amortized using the straightline method. This amortization is recorded once a year at yearend, if
possible. On August Rauch sold onehalf of this investment at
Required:
a Assuming this investment is classified as current and categorized as "available for sale":
i Record the June acquisition.
ii Make the necessary October entry to record the receipt of the first interest
payment.
iii. Make the necessary December adjusting entryies related to this bond issue.
iv Make the necessary April entry to record the receipt of the second interest
payment.
v Record the sale of part of this investment on August
b Assuming these bonds were acquired on April instead of June determine the
market interest rate on these bonds on the day they were acquired using the IRR function in Excel.
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