On January $1,2024,$ Surge Ltd$.$ issued bonds with a maturity value of $$6$ million at $104$ when the market rate of interest was $4\mathrm{.}5\%.$ The bonds have a contractual interest rate of $5\%$ and mature on January $1,2034.$ Interest on the bonds is payable semi$-$annually on July $1$ and January $1$ of each year. On January $1,2024,$ Treasury Ltd$.,$ a private company, purchased Surge Ltd$.$ bonds with a maturity value of $$2$ million to earn interest. Treasury Ltd$.$ will account for the investment at amortized cost using the effective$-$interest method to amortize the premium or discount. On December $31,2024,$ the bonds were trading at $103.$ Both companies$$ year end is December $31.$

Instructions

What amount did Treasury Ltd$.$ pay for Surge Ltd$.$s bonds?

Prepare the journal entry for Treasury Ltd$.($investor$)$ on January $1,2024.$

Prepare a bond amortization schedule for Treasury Ltd$.$ for the first four interest periods.

Prepare the journal entries for Treasury Ltd$.$ to record the receipt of interest on July $1,2024,$ the accrual of interest on December $31,2024,$ and the receipt of interest on January $1,2025.$

Show how the bonds and related income statement accounts would be presented in Treasury Ltd$.$s financial statements for the year ended December $31,2024.$

Prepare the journal entry for Surge Ltd$.($investee$)$ on January $1,2024.$

Prepare the journal entries for Surge Ltd$.$ to record the payment of interest on July $1,2024,$ the accrual of interest on December $31,2024,$ and the payment of interest on January $1,2025,$ assuming the company uses the effective$-$interest method to amortize any premium or discount.

Show how the bonds and related income statement accounts would be presented in Surge Ltd$.$s financial statements for the year ended December $31,2024.$