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Record all journal entries for the first year (3/1/x1 - 12/31/x1) on the books of the investor under the assumption that the investor plans to

  1. Record all journal entries for the first year (3/1/x1 - 12/31/x1) on the books of the investor under the assumption that the investor plans to hold the investment until maturity (i.e., reports the investment at amortized cost). Hint: Do not use a premium or discount account. Amortize discounts and premiums as a direct adjustment to the Investment in Bonds account. 2Describe what the investor will report (give category and dollar amounts) in the balance sheet and income statement at 12/31/x1.

Cash Flow Amount PV Factor Present Value
Maturity Value $10,000 0.55368 $5,537
Interest Payment $350 14.87747 $5,207
Issue Price $10,744
Item Amount
Total Int paid over the 10 year period 7,000
Premium on the Bond 744
Total Int Exp over the 10 year period 6,256
Six Month Period BEG Loan Bal Appropriate Int rate Interest Expense Interest Paid Premium Amort
1 10,744 3% 322 350 28
2 10,716 3% 321 350 29
Column Total 6,256 7,000 744
Payment at 9/1/X1
Interest Exp 322
Premium on Bonds Payable 28
Cash 350
Adjusting Entry at 12/31/X1
Interest expense 214
Premium on Bonds Payable 19
interest payable 233
Liability balance at 12/31/x1
Bonds payable 10,000
premium: BEG balance 744
Amortization 28
19 697
Total 9,303
For interest payable 233
income statement - 20x1
first 6 months $322
last 4 months $214
total $536

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