Problem 17-2 On January 1, 2017, Larkspur Company purchased $470,000, 10% bonds of Aguirre Co....
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Problem 17-2 On January 1, 2017, Larkspur Company purchased $470,000, 10% bonds of Aguirre Co. for $435,405. The bonds were purchased to yield 12% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Larkspur Company uses the effective-interest method to amortize discount or premium. On January 1, 2019, Larkspur Company sold the bonds for $436,876 after receiving interest to meet its liquidity needs. Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale.
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