Purchase and Sale of Bonds Starship Enterprises enters into the following transactions during 2010 and 2011: 2010

Question:

Purchase and Sale of Bonds Starship Enterprises enters into the following transactions during 2010 and 2011:

2010

Jan. 1: Purchased $100,000 face value of Northern Lights Inc. bonds at face value. The newly issued bonds have an interest rate of 8% paid semiannually on June 30 and December 31. The bonds mature in five years.

June 30: Received interest on the Northern Lights Inc. bonds.

Dec. 31: Received interest on the Northern Lights Inc. bonds.

2011

Jan. 1: Sold the Northern Lights Inc. bonds for $102,000.

Required

1. Identify and analyze all transactions on Starship’s records to account for its investment in the Northern Lights bonds.

2. Why was Starship able to sell its Northern Lights bonds for $102,000?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...