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(FASB) Busters #5 Topic: Accrual and Measurement of Interest Payments James Olds buys a four-year,...

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Accounting

(FASB) Busters #5 Topic: Accrual and Measurement of Interest Payments James Olds buys a four-year, $1,000,000 certificate of deposit from the Second National Bank. James will receive 5% interest in year 1; 5.5% in year 2; 6% in year three; and 6.5% in year 4. If James redeems this certificate before maturity date, he would receive a cumulative 4.5% annual rate of interest of 4.5%. The Bank has ascertained that less than one percent of its deposits redeem their certificates before the maturity date. The bank asks its accountant how to accrue and measure such interest payment obligations. Computations not required.

Provide specific Codification references (all supportive sections and paragraphs). Please use the structure below to answer the question:

1. The results will be in the FASB Codification citation structure: a. Topic XXX b. Subtopic YY c. Section - ZZ d. Paragraph PP 2. A citation reference will be ASC XXX-YY-ZZ-PP. 3. Citation Reference(s) that Address the Problem: Identify the citation reference(s) that supports your discussion / analysis and conclusion. 4. Discussion / Analysis. Please make a Conclusion!

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