Krispy Kreme operates and franchises a worldwide chain of quick- service drive- in doughnut stores. Customers drive up to a parking space and order doughnuts through an intercom speaker system. The ordered quantity is then delivered to the customer. Assume that Krispy Kreme Doughnuts Inc. has $ 15 million in cash to support future expansion and has decided to invest the funds in corporate bonds until the money is needed. Krispy Kreme purchases bonds with $ 15 million face value for $ 15.7 million cash on January 1, 2015. The bonds pay 6 percent interest each June 30 and December 31 and mature in four years. Krispy Kreme plans to hold the bonds until maturity.
Required:
1. What accounts were affected when the bonds were purchased on January 1, 2015?
2. What accounts were affected when interest was received on June 30, 2015?
3. Should Krispy Kreme prepare a journal entry if the market value of the bonds decreases to $ 16.3 million on December 31, 2015? Explain.