Question
On January 1, 2018, Mason Investments bought $750,000 of 6% bonds.The bonds mature on June 30, 2023.The market rate of interest for similar issues is
On January 1, 2018, Mason Investments bought $750,000 of 6% bonds.The bonds mature on June 30, 2023.The market rate of interest for similar issues is 5%.Interest is paid semi-annually on June 30 and December 31. Mason uses the effective-interest method.
Required:
1.Determine the purchase price of the bonds at January 1, 2018.
2. Record the entries Mason would make to record his investment in the bonds and the recognition of interest revenue on June 30, 2018, and December 31, 2018. Assume Mason accounts for these bonds as a held- to maturity investment. .
3. Identify the two criteria that Mason must meet to classify this investment as held-to-maturity
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