Answer:
1) Journalize Hale and Sons transaction related to the bonds for 2014
The McPhee Corporation bonds are classified as long term assets (more than 1 year), and as held to maturity
January 1, 2014, investment in McPhee Corporation bonds
Dr Investment in McPhee Corporation bonds 800,000
Cr Cash 800,000
June 30, first coupon payment received from investment in McPhee Corporation bonds
Dr Cash 20,000
Cr Interest revenue 20,000
December 31, second coupon payment received from investment in McPhee Corporation bonds
Dr Cash 20,000
Cr Interest revenue 20,000
2) journalize the entry required on the McPhee bonds maturity date.
December 31, 2018, last coupon payment + principal received from investment in McPhee Corporation bonds
Dr Cash 820,000
Cr Investment in McPhee Corporation bonds 800,000
Cr Interest revenue 20,000
