Q8E_2

Question

Accounting for debt investments

Griffin purchased a bond on January 1, 2018, for $140,000. The bond has a face value of $140,000 and matures in 20 years. The bond pays interest on June 30 and December 31 at a 3% annual rate. Griffin plans on holding the investment until maturity.

Requirements

2. Journalize the transaction related to Griffin’s disposition of the bond at maturity on December 31, 2037. (Assume the last interest payment has already been recorded.) Explanations are not required.

Step-by-Step Solution

Verified

Answer

Both sides of the Journal total $140,000.

1Step 1: Definition of Debt Investment

The investment made by providing a loan to any business entity or individual is known as debt investment. Such investment provides regular income in the form of interest.

2Step 2: Journal Entries on Disposition of Bonds

Date	Accounts and Explanation	Debit $	Credit $
31 Dec 2037	Cash	$140,000
	Held to maturity – debt investment		$140,000

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