Question

Landmark Corp. buys $500,000 of Schroeter Company's 8%, 5-year bonds payable at par value on September 1. Interest payments are made semiannually. Landmark plans to hold the bonds for the 5-year life. When the bonds mature, the journal entry to record the proceeds will be:

Answer 1

Answer:

Dr. Cash                        $500,000

Cr. Bond Receivables  $500,000

Explanation:

Thee bond will mature at par, it means the par value will be received at the time of maturity. As Landmark Corp is a bond holder and it has to receive the par value. The account of Bond receivable will be credited to eliminate the a receivable and cash is debited as it is received and its balance needs to increase.

Answer 2

Answer:

Dr Cash                          $500,000

Cr Long-term investment                      $500,000

Explanation:

In order to determine the journal entry to pass when the bond matures,it would appropriate to first of all understand the entries posted  when the bond was purchased,which is that cash was credited and long term investment account was debited.

The reverse would be the case at maturity which is that cash account would now receive an inflow,hence debited with $500,000  while the long-term investment certificate is parted with ,as a result the account should be credited as appropriate.