Business, 28.06.2020 02:01 JakeCline

7. On January 1, 2018, the Myrth Corporation decides to invest in Small Town bonds. The bonds mature on December 31, 2024, and pay interest of 7% on June 30 and December 31. The market rate of interest was 7% on January 1, 2018, so the $ 60 comma 000 maturity-value bonds sold for face value. Myrth Corporation intends to hold the bonds until maturity. Journalize the transactions related to Myrth Corporation's investment in Small Town bonds during 2018

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Answer from: jamskid

Journal Entries

Date Accounts & Explanations Debit ($) Credit ($)

Jan 1 2018 Bonds receivables 60,000

Cash 60,000

(Investment in bonds)

30-Jun-18 Cash 2,100

Interest income 2,100

(6 month interest received)

31-Dec-18 Cash 2,100

Interest income 2,100

(6 month interest received)

Explanation:

Bond Value = $60,000

Interest rate = 7%

Interest earned half yearly, effective rate = 7% × 6/12 = 3.5%

Half Yearly interest amount = 60,000 x 3.5% =$2100

Journal Entries

Date Accounts & Explanations Debit ($) Credit ($)

Jan 1 2018 Bonds receivables 60,000

Cash 60,000

(Investment in bonds)

30-Jun-18 Cash 2,100

Interest income 2,100

(6 month interest received)

31-Dec-18 Cash 2,100

Interest income 2,100

(6 month interest received)

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Answer from: Quest

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7. On January 1, 2018, the Myrth Corporation decides to invest in Small Town bonds. The bonds mature...

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