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On January 1, 2017, Garzon purchased 6% bonds (held -to-maturity) issued by PBS Utilities at a cost of $40,000, which is their par value. The bonds pay interest semiannually on July 1 and January 1. For 2017 , prepare entries to record Garzon’s July 1 receipt of interest and its December 31 year-end interest accrual.
Expert Answer
The required journal entries are :-
| Jan.1 , 2017 | HTM securities | 40000 | |
| Cash | 40000 | ||
| ( to record purchase of securities ) | |||
| July 1, 2017 | Cash ( 40000 * 3 % ) | 1200 | |
| Interest revenue | 1200 | ||
| ( to record receipt of interest ) | |||
| Dec. 31, 2017 | Interest receivable | 1200 | |
| Interest revenue | 1200 | ||
| ( to record interest accrual ) |
