Question

League Up & Co. owns vast amounts of corporate bonds. Suppose League Up buys $900,000 of RoastCo bonds at face value on January 2, 2018. The RoastCo bonds pay interest at the annual rate of 7% on June 30 and December 31 and mature on December 31, 2027. League Up intends to hold the investment until maturity. Requirements 1. Journalize any required 2018 entries for the bond investment. 2. How much cash interest will League Up receive each year from RoastCo? 3. How much interest revenue will League Up report during 2018 on this bond investment? Requirement 1. Journalize any required 2018 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 League Up's investment on January 2, 2018. Date Accounts and Explanation Debit Credit 2018 Jan. 2

Answer 1

Solution 1:

Journal Entries
Event	Date	Particulars	Debit	Credit
1	02-Jan-18	Investment in Bond Dr	$9,00,000.00
		To Cash		$9,00,000.00
		(Being investment in bond recorded)
2	30-Jun-18	Cash Dr ($900000*7%*6/12)	$31,500.00
		To Interest revenue		$31,500.00
		(To record cash interest received)
3	31-Dec-18	Cash Dr ($900000*7%*6/12)	$31,500.00
		To Interest revenue		$31,500.00
		(To record cash interest received)

Solution 2:

League up will receive $63,000 of cash interest each year from Roast Co.