Question

NauticalNautical

​& Co. owns vast amounts of corporate bonds. Suppose

NauticalNautical

buys

$ 600 comma 000$600,000

of

BitterCoBitterCo

bonds at face value on January​ 2,

20182018.

The

BitterCoBitterCo

bonds pay interest at the annual rate of

77​%

on June 30 and December 31 and mature on December​ 31,

20322032.

NauticalNautical

intends to hold the investment until maturity.

Requirements

1.	Journalize any required 20182018 entries for the bond investment.
2.	How much cash interest will NauticalNautical receive each year from BitterCoBitterCo​?
3.	How much interest revenue will NauticalNautical report during 20182018 on this bond​ investment?

Requirement 1. Journalize any required

20182018

entries for the bond investment. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)Begin by journalizing

NauticalNautical​'s

investment on January​ 2,

20182018.

Date			Accounts and Explanation	Debit	Credit
2018
Jan. 2

​Next, journalize the receipt of cash interest on June​ 30,

20182018.

Date			Accounts and Explanation	Debit	Credit
2018
Jun. 30

                 Now journalize the receipt of cash interest on December​ 31,

20182018.

Date			Accounts and Explanation	Debit	Credit
2018
Dec. 31

Requirement 2. How much cash interest will

NauticalNautical

receive each year from

BitterCoBitterCo​?

Nautical will receive $

of cash interest each year from BitterCo.

Requirement 3. How much interest revenue will

NauticalNautical

report during

20182018

on this bond​ investment?

Nautical will report $

of interest revenue during 2018 on this bond investment.

Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

1	Date	Accounts and explanation					Debit	Credit
	2018
	Jan 2.	Investment in Bitter co bonds					600000
		Cash						600000
		(Invested in bonds)
	June 30.	Cash			(600000*7%*6/12)		21000
		Interest revenue						21000
		(Interest received on bonds)
	Dec 31.	Cash			(600000*7%*6/12)		21000
		Interest revenue						21000
		(Interest received on bonds)
2	Cash interest per year=600000*7%=$ 42000
3	Interest revenue for 2018=21000+21000=$ 42000