Q18PGA_2
Question
Accounting for debt investments
Suppose Solomon Brothers purchases $500,000 of 6% annual bonds of Morin Corporation at face value on January 1, 2018. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2022. Solomon intends to hold the Morin bond investment until maturity.
Requirements
Journalize the entry required on the Morin bonds maturity date. (Assume the last interest payment has already been recorded.)
Step-by-Step Solution
VerifiedJournal entry at maturity will include an increase in cash and a decrease in investment.
The investment made by the company that include the debt securities purchased from other company is known as debt investment.
Date | Accounts and Explanation | Debit $ | Credit $ |
31 Dec 2022 | Cash | $500,000 |
|
| Held-to-maturity – debt investment |
| $500,000 |