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Suppose North Mark (NM) buys $1,600,000 of Oxon bonds at a price of 109. The Oxon bonds pay cash interest at the annual rate of
Suppose North Mark (NM) buys $1,600,000 of Oxon bonds at a price of 109. The Oxon bonds pay cash interest at the annual rate of 6% and mature at the end of five years. Journalize the following on NM's books: a. Purchase of the bond investment on January 2, 2020. NM expects to hold the investment to maturity. b. Receipt of annual cash interest on December 31, 2020. C. Amortization of the bonds on December 31, 2020. Use the effective interest of 5.25% to amortize the investment. d. Collection of the investment's face value at the maturity date on January 2, 2025. (Assume the receipt of 2024 interest and amortization of bonds for 2024 have already been recorded, so ignore these entries.)
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