On January 1, 2018, Wyatt Company purchased $400,000 of held-to-maturity bonds with a stated interest rate...
On January 1, 2018, Wyatt Company purchased $400,000 of held-to-maturity bonds with a stated interest rate of 4 %, for a term of four years. The bonds cost a total of $380,000 with a market interest rate of 6%. Interest is paid semi-annually on July 1 and December 31. Record the investment and receipt of interest for July 1 and December 31
Homework Answers
In the books of Wyatt Company:
| Date | Account Titles | Debit | Credit |
| $ | $ | ||
| January 1, 2018 | Bonds Receivable | 400,000 | |
| Discount on Bonds Receivable | 20,000 | ||
| Cash | 380,000 | ||
| July 1,2018 | Cash | 8,000 | |
| Discount on Bonds Receivable ( 380,000 x 6 % * 1/2 ) | 3,400 | ||
| Interest Revenue | 11,400 | ||
| December 31, 2018 | Cash | 8,000 | |
| Discount on Bonds Receivable ( 380,000 + 3,400 ) * 6 % * 1/2 | 3,502 | ||
| Interest Revenue | 11,502 |
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