Blimpie International Inc. sells franchises for Blimpie Subs & Salads (offering a quick-service sub sandwich in approximately
Question:
Blimpie International Inc. sells franchises for Blimpie Subs & Salads (offering a quick-service sub sandwich in approximately 2,000 franchise stores throughout the United States and 12 countries), Pasta Central, Maui Tacos, and Smoothie Island. Assume that Blimpie International has $10 million in cash to support future expansion and has decided to invest the funds in corporate bonds until the money is needed. Blimpie purchases bonds with $10 million face value for $10.3 million cash on January 1 , 2004. The bonds pay 8 percent interest each June 30 and December 3 1 and mature in four years. Blimpie International plans to hold the bonds until maturity.
Required: 1. What accounts were affected when the bonds were purchased on January 1 , 2004? 2. What accounts were affected when interest was received on June 30, 2004? 3. Should Blimpie prepare a journal entry if the market value of the bonds decreased to $9,700,000 on December 31, 2004? Explain.
Step by Step Answer: