Question

On January 1, 2018, the Cook's Restaurant decides to invest in Lake Myrth bonds. The bonds mature on December 31, 2023, and pay interest on June 30 and December 31 at 4% annually. The market rate of interest was 4% on January 1, 2018, so the $110,000 maturity value bonds sold for face value. Cook's intends to hold the bonds until December 31, 2023. Requirements 1. Journalize the transactions related to Cook's investment in Lake Myrth bonds during 2018. 2. In what category would Cook's report the investment on the December 31, 2018, balance sheet? Requirement 1. Journalize the transactions related to Cook's investment in Lake Myrth bonds during 2018. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing Cook's investment in Lake Myrth bonds on January 1, 2018. Date Accounts and Explanation Debit Debit Credit 2018 Jan. 1

OPTIONS

Answer 1

Requirement 1: Journal Entries debit credit Date jan 1 2018 Accounts & Explanations Bonds receivables Cash 110,000 $ 110,000 (Investment in bonds) 30-Jun-18 Cash( 110000 x 4% x6/12) 2,200 $ 2,200 Interest revenue (6 month interest received) 2,200 31-Dec-18 Cash( 110000 x 4% x 6/12) Interest revenue (6 month interest received) $ 2,200 Requirement 2: Gourmet's would report the investment as HELD TILL MATURITY debt investment classified as LONG TERM INVESTMENT asset on Dec 31, 2018 Balance Sheet.