Owl Co. buys $400,000, 10%, 4-year bonds at 90, with the interest payable semi-a

Question

Owl Co. buys $400,000, 10%, 4-year bonds at 90, with the interest payable semi-annually. Owl expects to hold this bond for 4 years using the straight-line method of amortization. Which account should Owl debit on the purchase of this bond? Cash Held-to-maturity security Bond payable Available-for-sale security Owl Co. buys $400,000, 10%, 4-year bonds at 90, with the interest payable semi-annually. Owl expects to hold this bond for 4 years using the straight-line method of amortization. Which account should Owl debit on the purchase of this bond? Cash Held-to-maturity security Bond payable Available-for-sale security Owl Co. buys $400,000, 10%, 4-year bonds at 90, with the interest payable semi-annually. Owl expects to hold this bond for 4 years using the straight-line method of amortization. Which account should Owl debit on the purchase of this bond? Cash Held-to-maturity security Bond payable Available-for-sale security

Explanation / Answer

Owl debit on the purchase of this bond:

Held-to-maturity security.

Bond Investment is classified as Held to maturity security because in the given case Owl expects to hold the Bond till maturity of the bonds.

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