Q8E_1 Accounting for debt investmentsG... [FREE SOLUTION]

Chapter 10: Q8E_1 (page 569)

Accounting for debt investments
Griffin purchased a bond on January 1, 2018, for $140,000. The bond has a face value of $140,000 and matures in 20 years. The bond pays interest on June 30 and December 31 at a 3% annual rate. Griffin plans on holding the investment until maturity.
Requirements
1. Journalize the 2018 transactions related to Griffin鈥檚 bond investment. Explanations are not required.

Expert verified

Both sides of the journal totals$144,200.

A maturity date can be defined as the specific date on which the borrower is liable to repay the principal amount of the loan and any interest due.

Date	Accounts and Explanation	Debit $	Credit $
1 Jan 2018	Held to maturity 鈥� debt investment	$140,000
	Cash		$140,000

30 June 2018	Cash	$2,100
	Interest revenue		$2,100

31 Dec 2018	Cash	$2,100
	Interest revenue		$2,100
		$144,200	$144,200

Working note:

Calculation of Interest Revenue:

I n t e r e s t r e v e n u e = F a c e v a l u e 脳 I n t e r e s t r a t e 脳 \frac{6}{12} = $ 140, 000 脳 3 % 脳 \frac{6}{12} = $ 2, 100

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BAROT INC
Balance Sheet
As of December 31, 2018 and 2017
	2018	2017
Total assets	\(32,978	\)30,660

Total liabilities	19,400	11,560
Total stockholder鈥檚 equity	13,578	19,100
Total liabilities and stockholder鈥檚 equity	\(32,978	\)30,660