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On January 1 of Year 1, Mellie Company issued a $25,000, 12% bond, at face value. Interest is paid annually each January 1, so the first coupon...
On January 1 of Year 1, Mellie Company issued a $25,000, 12% bond, at face value. Interest is paid annually each January 1, so the first coupon payment was made on January 1 of Year 2. Mellie uses the effective-interest method on its books. The entry related to this bond on December 31 of Year 1 would include which of the following?
a debit to Interest Receivable of $3,000a credit to Interest Expense of $3,000a debit to Interest Revenue of $3,000a credit to Cash of $3,000a credit to Interest Payable of $3,000a debit to Cash of $3,000No entry is necessary on December 31 of Year 1.
