Chapter 12 Investments (Intermediate Accounting - Spiceland)

On January 1, 2018, Tara, Inc. purchased $100,000 of Jackson Corporation bonds at a price of $95,000. The Jackson bonds pay 6% interest, but were purchased when the market interest rate for bonds of similar risk and maturity was 7%. The bonds pay interest semiannually on January 1 and July 1 of each year. Tara accounts for these bonds as a held-to-maturity security and uses the effective interest method. Prepare the necessary general journal entries to record the purchase of the Jackson bonds, the July 1 interest payment and discount amortization and the December 31 interest accrual and discount amortization.

List of Accounts

Accumulated Other Comprehensive Loss Allowance for Loss on Debt Investment Bonds Payable Cash Call Option Common Stock Cost of Goods Sold Debt Investments Dividend Revenue Dividend Receivable Equity Investments Fair Value Adjustment Futures Contract Gain on Sale of Investments Gain on Settlement of Call Option Gain on Settlement of Put Option Interest Expense Interest Receivable Interest Revenue Inventory Investment Income Loss on Impairment Loss on Sale of Investments Loss on Settlement of Call Option Loss on Settlement of Put Option No Entry Notes Payable Paid-in Capital in Excess of Par - Common Stock Put Option Recovery of Loss from Impairment Retained Earnings Sales Revenue Swap Contract Unrealized Holding Gain or Loss - Equity Unrealized Holding Gain or Loss - Income