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What will be journal entry when armchair bank receives

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Reference no: EM132968554

On July 1, 2020, Cyclic Inc. issued $1,000,000 in principal of 6% bonds due in July 2030. The bond pays interest semi-annually on January 2 and July 1.

On July 1, 2021, immediately following an interest payment, Armchair Bank purchased $5000 in face value of these bonds for $5550. Armchair Bank has the intention and ability to hold this bond to maturity. When Armchair Bank purchased the bond, it calculated that the historic market rate was 4.5%.

Problem 1: When Armchair Bank receives the interest payment on January 2, 2022, what will the journal entry be? Check all that apply.

Option 1: Cr. Amortization of premium on held-to-maturity debt -- $25

Option 2: Dr. Cash -- $150

Option 3: Dr. Interest receivable -- $125

Option 4: Cr. Interest revenue -- $125

Option 5: Cr. Interest revenue -- $150

Option 6: Dr. Cash -- $125

Reference no: EM132968554

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