Carla company purchased, on January 1,2017, as a held to maturity investment, $8

Question

Carla company purchased, on January 1,2017, as a held to maturity investment, $81,000 of the 8%, 5 year bonds of Chester Corporation for $74,859, which provides a 10% return. Prepare Carla’s journal entries for (a) the purchase of the investment and (b) the receipt of annual interest and discount amortization. Assume effective interest amortization is used. Carla company purchased, on January 1,2017, as a held to maturity investment, $81,000 of the 8%, 5 year bonds of Chester Corporation for $74,859, which provides a 10% return. Prepare Carla’s journal entries for (a) the purchase of the investment and (b) the receipt of annual interest and discount amortization. Assume effective interest amortization is used.

Explanation / Answer

General Journal Debit Credit (a) Debt Investments (Held-to-Maturity) $74,859 Cash $74,859 (b) Cash($81,000 X .08) $6,480 Debt Investments (Held-to-Maturity) $1,006 Interest Revenue ($74,859 X .10) $7,486

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