Question

Lance Brothers Enterprises acquired $665,000 of 3% bonds, dated July 1, on July 1, 2021, as a long-term investment Management has the positive intent and ability to hold the bonds until maturity. The market interest rate yield) was 4 for bonds of similar risk and maturity Lance Brothers paid $585.000 for the investment in bonds and will receive interest semiannually on June 30 and December Prepare the journal entries (a) to record Lance Brothers' investment in the bonds on July 1, 2021, and (b) to record interest on December 31, 2021 at the effective market) rate. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet Record Lance Brothers' investment in the bonds on July 1, 2021. General Journal Debit Credit My 01, 2021

Answer 1

Answer:

a)

Date	Particulars	Debit ($)	Credit ($)
July 1, 2021	Investment in bonds (face amount)	665,000
	Discount on bond investment (difference)		80,000
	Cash (price of bonds)		585,000

b)

Date	Particulars	Debit ($)	Credit ($)
Dec 31, 2021	Cash (1.5%x$665000)	9,975
	Discount on bond investment (difference)	1,725
	Interest revenue (2% x $585000)		11,700