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Teliton Company purchased $2,250,000 of 8% bonds of Minho Company on January 1, 2020, paying $1,969,601. The bonds mature January 1, 2030; interest is payable

Teliton Company purchased $2,250,000 of 8% bonds of Minho Company on January 1, 2020, paying $1,969,601. The bonds mature January 1, 2030; interest is payable each July 1 and January 1. The effective yield on the bonds is 10%. Ximena Company uses the effective-interest method and plans to hold these bonds to maturity.

What journal entry is made by Teliton Company on January 1, 2020?

a)

Debt Investment 2,250,000
Discount on Debt Investment 280,399
Cash 1,969,601

b)

Debt Investment 2,250,000
Cash 2,250,000

c)

Debt Investment 2,250,000
Premium on Debt Investment 280,399
Cash 1,969,601

d)

Debt Investment 1,969,601
Cash 1,969,601

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