Question: Foster Company purchased $ 1 , 2 0 0 , 0 0 0 of 8 % , 5 - year bonds from Carlin, Inc. on

Foster Company purchased $1,200,000 of 8%,5-year bonds from Carlin, Inc. on January 1,2023, with interest payable on July 1 and December 31. The bonds sold for $1,249,896 at an effective interest rate of 7%. The fair value of the bond at year-end was $1,230,000.  
 
a. Using the effective interest method, prepare the purchase of the bonds and the first two interest payments received.
b. Assume the bond is categorized as available for sale, prepare the year-end adjustment on December 31.

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