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    Calculating Debt Investments

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    On January 1, 2013, King Corporation acquired for $750,000 of 10% bonds, paying $705,186. The bonds mature January 1, 2024; interest is payable each July 1 and January 1. The discount of $44,814 provides an effective yield of 11%. King Corporation uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2013, King Corporation should increase its Debt Investments account for these bonds by (round to the nearest dollar):

    a. $2,241
    b. $3,750
    c. $1,285
    d. $7,052

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    Solution Preview

    44,814/10 = $4,481 per year bond discount amortization - twice per year, ...

    Solution Summary

    This solution helps with a multiple choice question involving calculating debt investments.