On January 1, 2019, Gatrong Corporation purchased 12%, 5-year Fleming Corporation bonds with a face value...
On January 1, 2019, Gatrong Corporation purchased 12%, 5-year Fleming Corporation bonds with a face value of $200,000. It expects to hold these bonds until maturity. The bonds pay interest semiannually on June 30 and December 31. Gatrong paid $215,443, a price that yields a 10% effective annual interest rate.
Required:
| Prepare the journal entry on June 30 for Gatrong to record the first interest receipt, using the effective interest method. 3 journal entries |
Homework Answers
| Date | Account Title | Debit | Credit |
| Jun 30, 2019 | Cash [($200000 x 12%)/2] | $12,000.00 | |
| Investment in Bonds | $1,228.00 | ||
| Interest Revenue [$(215443 x 10%)/2] | $10,772.00 | ||
| (To record interest revenue in Bond) |
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