Homework Answers
Purchase consideration paid is towards the cost of the bonds. No amount is paid for interest accrued.
Cost of bonds = Number of bonds X price per bond + commission
= 5 X ($1,000 X 98%) + $40
= $4,940
Entry will be:
| Account | Debit | Credit |
| Short-term investments - Bonds | $ 4,940 | |
| Cash | $ 4,940 |
Correct option is Option.A
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