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Prepare the first four lines of a bond amortization table

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Question - Investment in Debt Securities - On January 1, 2020, Thompson Company purchased 8% bonds, having a maturity value of $400,000, for $369,672 cash. The bonds provide the bond holders with a 10% yield. They are dated January1, 2020, and mature on January 1, 2025. Interest is receivable annually on January 1 of each year. Thompson uses the effective interest method to allocate unamortized discount or premium. Thompson does not plan to hold the bonds until maturity and did not purchase the bonds to sell in the near term. The fair value of the bonds on December 31, 2020, is $372,000. The fair value of the bonds on December 31, 2021, is $383,000.

Required -

a. Prepare the first four lines of a bond amortization table.

b. Prepare all necessary journal entries for 2020 and 2021.

Reference no: EM132893157

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