(#7) Held-to-Maturity Bond Investment

On January 1, 2018, Gatrong Corporation purchased 13%, 5-year Fleming Corporation bonds with a face value of $100,000. It expects to hold these bonds until maturity. The bonds pay interest semiannually on June 30 and December 31. Gatrong paid $111,583, a price that yields a 10% effective annual interest rate.

Required:

Prepare the journal entry on June 30 for Gatrong to record the first interest receipt, using the effective interest method.

CHART OF ACCOUNTS

Gatrong Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
125	Notes Receivable
141	Inventory
151	Supplies
152	Prepaid Insurance
191	Investment in Held-to-Maturity Debt Securities

	LIABILITIES
211	Accounts Payable
221	Notes Payable
224	Interest Payable
231	Salaries Payable

	EQUITY
311	Common Stock
331	Retained Earnings
351	Dividends
391	Income Summary

	REVENUE
411	Sales Revenue
431	Interest Income

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
513	Delivery Expense
515	Supplies Expense
521	Advertising Expense
523	Salaries Expense
531	Bad debt Expense
539	Miscellaneous Expenses
540	Interest Expense

Prepare the journal entry on June 30 for Gatrong to record the first interest receipt, using the effective interest method. Additional Instructions

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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