Use the following information to answer the next __3__ questions. On January 1, 2017, Pell Company bought bonds issued by Green Company. The bonds had a face value of $1,000,000, contract rate of 10%, and were for 20 years. Pell paid $1,198,000 for the bonds, an 8% yield. Interest is received each year on December 31.

5. How much cash does Pell receive on December 31, 2017?

a. $100,000 b. $119,800 c. $80,000 d. $95,840

6. If Pell uses the effective interest method of amortizing premium or discount, how much interest revenue does Pell record for 20107?

a. $100,000 b. $119,800 c. $80,000 d. $95,840

7. What is the balance of the account Investment in Bond Available-for-sale at December 31, 2017 after the interest journal entry is made?

a. $1,000,000 b. $1,198,000 c. $1,193,840 d. $1,174,040