Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $37,282 on January 1. The market interest

Question

3 years ago

8

Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzelmania, Inc., for $37,282 on January 1. The market interest

rate for bonds of similar risk and maturity is 8%. Salt Foods receives interest semiannually on June 30 and December 31.
1. Record the investment in bonds.2. Record receipt of the first interest payment on June 30.

Business

1 answer:

alexira [117] · Answer 1 · 2022-07-27T00:46:36+03:00

Answer and Explanation:

The journal entries are shown below;

a. Investment Dr $37,282

To Cash $37,282

(being the investment in bonds is recorded)

b.

Cash (($1,000 × $40) × 0.07 × 6 ÷ 12) $1,400

Investment $91

To interest revenue ($37,282 ×8% × 6 ÷ 12) $1,491

(Being the first interest payment is recorded)