Patton Co. purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying $376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Patton Co. uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2011, Patton Co. should increase its Held-to-Maturity Debt Securities account for the Scott Co. bonds by: a. $2,392. b. $1,371. c. $1,196. d. $686.
Patton Co. purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying $376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Patton Co. uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2011, Patton Co. should increase its Held-to-Maturity Debt Securities account for the Scott Co. bonds by: a. $2,392. b. $1,371. c. $1,196. d. $686.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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