Sarasota Company purchased, on January 1, 2017, as a held-to-maturity investment, $79,000 of the 9%, 5-year...

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

Expert Solution

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

ekkarill92 answered 9 months ago

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