Question 11 Ivanhoe Company purchased, on January 1, 2017, as a held-to-maturity

Question

Question 11 Ivanhoe Company purchased, on January 1, 2017, as a held-to-maturity investment, $89,000 of the 896, 5-year bonds of Chester Corporation for $82,252, which provides an 10% return. Prepare Ivanhoe's journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) Debt Investments 82,252 Cash 82,252 (b) Cash Debt Investments Interest Revenue

Explanation / Answer

Journal entry :

No Account titles and explanation debit credit a Debt investment 82252 Cash 82252 (To record purchase of investment) b Cash (89000*8%) 7120 Debt investment 1105 Interest revenue (82252*10%) 8225 (To record annual interest)

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