(#6) Held-to-Maturity Bond Investment
On January 1, 2018, Gatrong Corporation purchased 13%, 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 $215,075, a price that yields a 11% effective annual interest rate.
Required:
| Prepare the journal entry of Gatrong to record the purchase of the bonds. |
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Prepare the journal entry of Gatrong to record the purchase of the bonds on January 1.
GENERAL JOURNAL !(Just need the amounts)!
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
|
1 |
Jan. 1 |
Investment in Held-to-Maturity Debt Securities |
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2 |
Cash |
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DATE |
ACCOUNT TITLE |
POST. REF. |
DEBIT |
CREDIT |
|
Jan. 1 |
Investment in Held-to-Maturity Debt Securities |
$ 2,15,075.00 |
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Cash |
$ 2,15,075.00 |
The amount paid for bond will be recorded as investment in bond.
The maturity value of bond will be the par value of bond so every time interest is received investment will decrease so that investment in bond becomes equal to par value.
The premium paid maybe amortized using effective interest method or straight method.
(#6) Held-to-Maturity Bond Investment On January 1, 2018, Gatrong Corporation purchased 13%, 5-year Fleming Corporation bonds...
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