What would be the amortization for the first year

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Debit the cash account by $1,865,791

Debit the Discount on bond account $134,209  as this is the cash received at the time of issuance. and it will be amortised over the period of bond life.

Credit the bond payable account by $2,000,000 as this is the value which will be paid at the time of maturity. the bond of $134,209 would have to be amortized over the life of the bond. There are two methods of amortization....the straight line method and the effective rate.

Problem 1: Assume that you are using the effective rate method of amortization, what would be the amortization for the first year? and how would you journalize it ?

Reference no: EM132697925

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