On January 1, 2011, Randy Incorporated purchased $500,000 of 20-year, 10% bonds when the market rate of

Question:

On January 1, 2011, Randy Incorporated purchased $500,000 of 20-year, 10% bonds when the market rate of interest was 8%. Interest is to be paid on June 30 and December 31 of each year.

1. Prepare the journal entry to record the purchase of the debt security classified as held to maturity.

2. Prepare the journal entry to record the receipt of the first two interest payments, assuming that Randy accounts for the debt security as held to maturity and uses the effective-interest method.

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...