ABC purchased GHI 5 year bond that is not sure if it will set or hold unlit matu

Question

ABC purchased GHI 5 year bond that is not sure if it will set or hold unlit maturity for 25,000 cash. It pays 10% interest annually (1/1). Fair value of the bond at year-end was $24,500. Use straight line method to conduct journal entries and show all work. ABC purchased GHI 5 year bond that is not sure if it will set or hold unlit maturity for 25,000 cash. It pays 10% interest annually (1/1). Fair value of the bond at year-end was $24,500. Use straight line method to conduct journal entries and show all work.

Explanation / Answer

Working Part-

1. Face value of Investment=$25000

2. Interest Income=$25000*10%=$2500

3. Interest per Year=$2500/5=$500

Journal Entries-

Dete Particulars Debit Credit First Year Bonds Receble 24500 Interest Income 500 Cash Ac 25000 Every Year Interest Income 500 Cash Ac 500

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