Answer:
cash 43,300,000 debit
discount on BP 1, 140,000 debit
bonds payable 44,000,000 credit
interest payable 440,000 credit
-- to record issuance of BP --
investment on bonds 44,000 debit
cash 43,050 credit
discount on bonds 950 credit
-- to record purchase of bonds --
Explanation:
Face amount: 44,000,000
interest payable 440,000
issued at 43,300,000
discount 1,140,000
accrued interest: 44,000,000 x 12% / 12 = 440,000
The company issued the bonds for less than his face value. The bonds have a discount.
carrying value of the bonds at August 31th
1,140,000 / 6 = 190,000 amortization
1,140,000 - 190,000 = 950,000
Carrying value 44,000,000 - 950,000 = 43,050,000
Investment: 44,000 in bonds
the bonds will also have a discount so it were purchase at 43,050
44,000,000 --> 43,050,000
44,000 --> 43,050
