Matthews Ltd. purchased $1 million of 10-year, 4% bonds on July 1, 2018, at 108.5 (this means

Question:

Matthews Ltd. purchased $1 million of 10-year, 4% bonds on July 1, 2018, at 108.5 (this means 108.5% of maturity value). Interest is received semi-annually on January 1 and July 1. The bonds were trading at 107 at December 31, 2018. Matthews intends to trade the bonds in the near future and is using the fair value through profit or loss model.

Instructions

(a) Record the purchase of the bonds.

(b) Record any required adjusting journal entries at December 31.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...