Question

Lance Brothers Enterprises acquired $560,000 of 4% bonds, dated July 1. on July 1, 2018, as a long-term investment Management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Lance Brothers paid $480,000 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, 2018, and (b) to record interest on December 31, 2018, 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 1 Record Lance Brothers' investment in the bonds on July 1, 2018 2. Record interest on December 31, 2018, at the effective (market) rate. Credit Note : = journal entry has been entered Record entry Clear entry View general Journal

Answer 1

A	Investments in bonds	560,000
	Discount on bonds investments		80,000
	Cash		480,000
B	Cash (560,000*4%*6/12)	11200
	Discount on bond investment	800
	Interest revenue (480,000*5%*6/12)		12,000