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Compute the amount of the premium

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Question - Newton Corporation sold its $1,000,000, 7% ten-year bonds to the public on January 1, 2011. The bonds pay interest annually, beginning on December 31, 2011. Newton received $1,153,420 in cash at the issuance of the bonds. The market rate of interest when the bonds were sold was 5%.

Compute the amount of the premium that Newton Corporation should amortize on December 31, 2011, assuming the "effective-interest" method is used.

Reference no: EM132077414

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