Mercer Corporation acquired $400,000 of Park Companys bonds on June 30, 2018, for $409,991.12. The...
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Mercer Corporation acquired $400,000 of Park Companys bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021.
Required: 1. Prepare an investment interest income and premium amortization schedule, using the:
a. straight-line method
b. effective interest method
2. Prepare journal entries to record the December 31, 2018, and December 31, 2020, interest receipts using both methods.
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