Question

On january? 1, 2017, dodge company purchases? $90,000, 7% bonds at a price of 86.4 and a maturity date of january? 1, 2027. dodge company intends to hold the bonds until their maturity date. interest is paid? semiannually, on january 1 and july 1. dodge company has a calendar year end. the entry to record the purchase of the bond investment on january? 1, 2017,? is

Answer 1

We should note that the bond investment account is recorded at cost by the Bondholder or Investor.

The cost or price is calculated as:

Cost = $90,000 * 86.4%

Cost = $90,000 * 0.864 = $77,760

Therefore, the entry to record should be:

debit Held-to-Maturity Investment in Bonds for $77,760 and credit Cash for $77,760