On January 1, 2017, Corbin Company purchases $170,000, 6% bonds at a price of 99 and a maturity date of January 1, 2027. Corbin Company intends to hold the bonds until their maturity date. Interest is paid semiannually, on January 1 and July 1. Corbin Company has a calendar year end and uses the straight-line amortization method for discounts and premiums. The entry to amortize the bond investment on July 1, 2017 is:

Question

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The bond was purchased at a discount (99% of $170,000), so the discount is amortized over the bond's life. The discount is $1,700 ($170,000 - $168,300). With a 10-year life and semiannual interest, the amortization per period is $85 ($1,700 / 20 periods). Thus, the entry is to debit Held-to-Maturity Investment in Bonds for $85 and credit Interest Revenue for $85.

On January 1, 2017, Corbin Company Purchases $170,000, 6% Bonds