Question
RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a coupon rate of 7 percent, mature in 10 years,
RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a coupon rate of 7 percent, mature in 10 years, and pay interest annually every December 31. All of the bonds were sold on January 1 of this year. Record the sale of the bonds on January 1 and the payment of interest on December 31 of this year, without the use of a premium account. RKO uses the effective-interest amortization method. Assume an annual market rate of interest of 6 percent.
Record the sales of the bonds on January 1. Record the payment of interest on December 31 using effective-interest amortization.
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