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On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased

  1. On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the bond premium (by straight-line method) for the year by Orange Inc. includes a credit to:

    1. Interest Revenue for $5,000

    2. Interest Revenue for $2,500

    3. Investment in Lisbon Co. Bonds $2,500

    4. Investment in Lisbon Co. Bonds $5,000

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