On January 1, 2019, Lynch Company acquired 13% bonds with a face value of $50,000. The bonds pay interest on June 30 and December 31 and mature on December 31, 2021. Lynch paid $51,229.35, a price that yields a 12% effective annual interest rate. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and premium amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and December 31, 2021.
On January 1, 2019, Lynch Company acquired 13% bonds with a face value of $50,000. The bonds pay interest on June 30 and December 31 and mature on December 31, 2021. Lynch paid $51,229.35, a price that yields a 12% effective annual interest rate. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and premium amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2019, Lynch Company acquired 13% bonds with a face value of $50,000. The bonds pay
interest on June 30 and December 31 and mature on December 31, 2021. Lynch paid $51,229.35, a price
that yields a 12% effective annual interest rate.
Required:
1. Record the purchase of the bonds.
2. Prepare an investment interest income and premium amortization schedule using the effective interest method.
3. Record the receipts of interest on June 30, 2019, and December 31, 2021.
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