Asked by Angela Trevino on Jul 15, 2024
Verified
Bay Company acquires 60 8% 5 year $1000 Community bonds on January 1 2017 for $60000. The journal entry to record this investment includes a debit to
A) Debt Investments for $64800.
B) Debt Investments for $60000.
C) Cash for $60000.
D) Stock Investments for $60000.
Debt Investments
Financial assets representing money borrowed that must be repaid, typically with interest, such as bonds or loans.
Stock Investments
Financial assets representing ownership in a company, with the expectation of earning dividends or selling at a higher price for profit.
- Understand the accounting procedures and records related to the acquisition, accrual of interest, and disposal of debt investments.
Verified Answer
AL
Ashley LachapelleJul 16, 2024
Final Answer :
B
Explanation :
The journal entry to record the purchase of the bonds would include a debit to Debt Investments for the cost of the investment, which in this case is $60000. The fact that the bonds have an 8% coupon rate and a 5-year maturity is not relevant to the journal entry at the time of purchase.
Learning Objectives
- Understand the accounting procedures and records related to the acquisition, accrual of interest, and disposal of debt investments.
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