Using the data from Exercise 15-17, record the entries using the straight-line method for amortization of discounts

Question:

Using the data from Exercise 15-17, record the entries using the straight-line method for amortization of discounts and premiums.

In exercise 15-17

On January 2, 2015, when the market interest rate was 6.5%, Maureen Company purchased $80,000, 10-year, 7% bonds at 103.6 with the intent to hold them to matu- rity. January 2 is the interest payment date.

a. Journalize the entry to record the bond purchase.

b. Journalize the accrued interest adjustment and premium amortization on December 31, 2015, using the effective interest method for amortization of discounts and premiums.

c. What is the relationship between the market rate of interest and the coupon rate on the bond investment acquisition date?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...