Glover Corporation purchased bonds with a face value of $300,000 for $307,493.34 on January 1, 2018. The bonds carry a face rate of interest of 12%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, are due December 31, 2020, and were purchased to yield 11%. On January 1, 2019, in contemplation of a major acquisition, the bonds were sold for $300,000. Glover uses the effective interest method.

Required:

1.	Prepare journal entries to record the purchase of the bonds, the first two interest receipts, and the sale of the bonds.
2.	Next Level Which of the following is an acceptable reason for a company to sell a held-to-maturity debt security prior to its maturity?

CHART OF ACCOUNTS

Glover Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation
191	Investment in Held-to-Maturity Debt Securities

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Income
434	Gain on Sale of Debt Securities

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
599	Loss on Sale of Debt Securities
910	Income Tax Expense

Prepare journal entries to record the purchase of the bonds on January 1, 2018 and the first two interest receipts on June 30 and December 31, 2018. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8

Prepare journal entry to record the sale of the bonds on January 1, 2019. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3

Which of the following is an acceptable reason for a company to sell a held-to-maturity debt security prior to its maturity?

an isolated, nonrecurring or unusual event

the need for cash

a change in market rates