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The Baybrook Company issued $5 million of 8% bonds on January 1, 2020. The bonds...

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Accounting

The Baybrook Company issued $5 million of 8% bonds on January 1, 2020. The bonds mature in 10 years. For bonds of similar risk and maturity, the market yield is 6%. Interest is paid semiannually on June 30 and December 31. The Baybrook Company uses the effective interest method for the amortization.

(a) How much interest expense will be recognized on December 31, 2020?

(b) At the end of 2020, the BayBrook should report unamortized bond premium of:

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