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Effective-interest method of amortization of bond premium

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Reference no: EM132418670

Please help with the following exercise:

On January 1, 2018, Titanic Corp. acquired 8%, $100,000 (face value) bonds of Iceburg Ltd., to yield 6%. The bonds were dated January 1, 2018, and mature on December 31, 2022, with interest payable each January 1. Titanic intends to hold the bonds to maturity, and will use the FV-NI model and the effective-interest method of amortization of bond premium or discount.

Required

Prepare the following entries in Titanic's books:

  1. Acquisition of bonds on January 1, 2018,
  2. Year-end adjusting entry at December 31, 2018,
  3. Receipt of the first interest payment on January 1, 2019.

Round all values to the nearest dollar.

Reference no: EM132418670

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