On October 1, Dennis Company purchased $200,000 face value 12% bonds for 98 plus accrued interest and brokerage fees and classified them as held-to-maturity securities. Interest is paid semiannually on January 1 and July 1. Brokerage fees for this transaction were $700. At what amount should this acquisition of bonds be recorded?

Question

Quizplus · Accepted Answer

The bonds are purchased at 98% of face value, which is $196,000 (98% of $200,000). Adding the brokerage fees of $700, the total acquisition cost is $196,700. Accrued interest is not included in the acquisition cost for held-to-maturity securities.

On October 1, Dennis Company Purchased $200,000 Face Value 12