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15. On February 1, 20x1, as a short-term investment, the Friedman Company purchased 20 Lynch Corporation bonds having a face value of $1,000 each at 98 plus accrued interest. Interest on these 696 Lynch Corporation bonds is paid semiannually on January 1 and July 1. Which of the following journal entries represents the correct recording of this transaction? A. Short-Term Investment-Bonds 20,000 100 Bond Interest Receivable Cash 20,100 B. Short-Term Investment-Bonds 19,600 100 Bond Interest Receivable Cash 19,700 C. Short-Term Investment-Bonds 20,000 600 Bond Interest Receivable Cash 20,600 19,600 600 D. Short-Term Investment-Bonds Bond Interest Receivable Cash 20,200

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6.00% 20,000 Bond Rate Face Value or Maturity Value 20 x $1,000 Accrued interest ($20,000 x6% x 1/12) Market Value 20,00098% Purchase price 100 19,600 19,700 A+B Journal Entry Debit Credit 19,600 100 Feb 1 Investment in Bonds Interest Receivable Cash 19,700 Answer: Option B

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