Accounting Case Problem

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% interest in year 4. If James “redeems” this certificate before the 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 depositors redeem their certificates before the
maturity date. The bank asks its accountant how to accrue and measure such interest
payment obligations.
Using steps 1-5 in the research process
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