Straight-line method is appropriate for amortizing the bond

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Reference no: EM13824270

Insurance companies and pension plans hold large quantities of bond investments. Wolverine Insurance Corp. purchased $600,000 of 6% bonds of Eaton, Inc., for 106 on March 1, 20X4. These bonds pay interest on March 1 and September 1 each year. They mature on March 1, 20X8. At December 31, 20X4, the market price of the bonds is 103.5.

1. Journalize Wolverine's purchase of the bonds as a long-term investment on March 1, 20X4 (to be held to maturity), receipt of cash interest, and amortization of the bond investment at December 31, 20X4. The straight-line method is appropriate for amortizing the bond investment.

2. Show all financial statement effects of this long-term bond investment on Wolverine Insurance Corp.'s balance sheet and income statement at December 31,20X4

Reference no: EM13824270

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