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On January 1, 2018, Wyatt Company purchased $400,000 of held-to-maturity bonds with a stated interest rate...

On January 1, 2018, Wyatt Company purchased $400,000 of held-to-maturity bonds with a stated interest rate of 4 %, for a term of four years. The bonds cost a total of $380,000 with a market interest rate of 6%. Interest is paid semi-annually on July 1 and December 31. Record the investment and receipt of interest for July 1 and December 31

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Answer #1

In the books of Wyatt Company:

Date Account Titles Debit Credit
$ $
January 1, 2018 Bonds Receivable 400,000
Discount on Bonds Receivable 20,000
Cash 380,000
July 1,2018 Cash 8,000
Discount on Bonds Receivable ( 380,000 x 6 % * 1/2 ) 3,400
Interest Revenue 11,400
December 31, 2018 Cash 8,000
Discount on Bonds Receivable ( 380,000 + 3,400 ) * 6 % * 1/2 3,502
Interest Revenue 11,502
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