On January 1, 2018, Dudas Inc. paid $917,783 plus a $5,000 transaction fee to acquire $1,000,000 in bonds that mature in 10 years. The bonds pay interest annually at 4.0% per annum on December 31. Dudas Inc. classifies its investment as a financial asset at amortized cost, which is in keeping with the objective of its business model and the contractual cash flow characteristics of the investment. Dudas Inc. has a December 31 year-end. It does not accrue interest income during the year.

Required:
a. Determine the effective interest rate that Dudas is earning on its investment. Use a financial calculator or spreadsheet.
b. Prepare the journal entry to record the acquisition of the investment.
c. Prepare the journal entry to record the receipt of interest on December 31, 2018.
d. Prepare the journal entry to record the receipt of interest on December 31, 2019.