Amex Corporation invests excess cash to purchase $25,000 in corporate bonds on M

Question

Amex Corporation invests excess cash to purchase $25,000 in corporate bonds on March 30, 2018. In addition to the $25,000, Amex also paid a brokerage fee of $1,000. Amex intends to hold the bonds untl maturity and has the abilty to do so. When the bonds mature on March 30, 2020, Amex plans to use the cash for iss business expansion. Which of the following is included in the journal entry on March 30, 2018? O A. a debit to Held-to-Maturity Debt Investments for $25,000 @) B. a debit to Held-to-Maturity Debt Investments for $26,000 for $26,00o a debt to Trading-Debt Investments for $25,000 D.

Explanation / Answer

Since there is an intention and ability to hold the investment till maturity the same will be classified as Available for sale, initialy valued at fair value and subsequent measurement at amortised costs. The transaction costs are capitalised. Hence in the extant case, the brokerage cost will be included in the cost. Hence the right answer is option C. a debit to trading-Debt investments for $ 26,000

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