In: Accounting
Sarasota Company purchased, on January 1, 2017, as a held-to-maturity investment, $79,000 of the 9%, 5-year bonds of Chester Corporation for $73,161, which provides an 11% return. Prepare Sarasota’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
Transaction | General Journal | Debit | Credit |
(a) | Investment in bonds | $ 73,161.00 | |
Cash | $ 73,161.00 | ||
(Investment in bonds purchased) | |||
(b) | Cash | $ 7,110.00 | |
Investment in bonds | $ 937.71 | ||
Interest income | $ 8,047.71 | ||
(To record interest revenue) |
Amortization table | |||||
Period | Cash payment | Interest expense | Discount on Bonds payable | Carrying Value of Bond | |
Issued at the beg of 2017 | $ 5,839.00 | $ 73,161.00 | |||
2017 | $ 7,110.00 | $ 8,047.71 | $ 937.71 | $ 74,098.71 |