On January 1, 2012, Morgan Company acquires $300,000 of Nicklaus, Inc., 9% bonds at a price of

Question:

On January 1, 2012, Morgan Company acquires $300,000 of Nicklaus, Inc., 9% bonds at a price of $278,384. The interest is payable each December 31, and the bonds mature December 31, 2014. The investment will provide Morgan Company a 12% yield. The bonds are classified as held-to maturity.

Instructions
  (a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (Round to nearest dollar.)

  (b) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the effective-interest method. (Round to nearest cent.)
  (c) Prepare the journal entry for the interest receipt of December 31, 2013, and the discount amortization under the straight-line method.
  (d) Prepare the journal entry for the interest receipt of December 31, 2013, and the discount amortization under the effective-interest method.

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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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