Question

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Butler purchased a bond on January 1, 2018, for $150,000. The bond has a face value of $150,000 and matures in 10 years. The bond pays interest on June 30 and December 31 at a 2% annual rate. Butler plans on holding the investment until maturity. Read the requirements. Requirement 1. Journalize the 2018 transactions related to Butler's bond investment. Explanations are not required. (Record debits first, then credits. Exclude explanations from journal entries.) Begin by journalizing Butler's investment on January 1, 2018. Date Accounts Debit Credit Jan. 1 Requirements 1. Journalize the 2018 transactions related to Butler's bond investment. Explanations are not required. 2. Journalize the transaction related to Butler's disposition of the bond at maturity on December 31, 2027. (Assume the last interest payment has already been recorded.) Explanations are not required. Print Print Done Done]

Answer 1

Solution: Q1 Date Jan. 1, 2018 Credit Accounts Debit Held-to-Maturity Debt Investments 150000 Cash 150000 1500 Jun. 30, 2018 Cash Interest Revenue (150000*2%*6/12) 1500 1500 Dec. 31, 2018 Cash Interest Revenue (150000*2%*6/12) 1500 150000 Dec. 31, 2027 Cash Held-to-Maturity Debt Investments 150000

The Roastco bond investment will be classified as a long-term asset. 2) Credit Debit 30000 Date Accounts and Explanation Dec 31, 2032 Cash Interest revenue (1000000*6%*6/12) (To record cash interest received) 30000 1000000 Dec 31, 2032 Held-to-Maturity Debt Investments cash (To record sale of invetment on maturity) 1000000