Solo Corp.purchased $500,000 of bonds for $515,000 as an investment.If Solo expects to hold the bonds until they mature,the initial investment should be recorded at:

Question

Quizplus · Accepted Answer

When bonds are purchased at a premium, the cost of investment is greater than the face value of the bonds. In this case, the purchase price of $515,000 is greater than the face value of $500,000, indicating that the bonds were purchased at a premium. Since Solo Corp. plans to hold the bonds until maturity, it will not recognize the premium as an expense upfront. Therefore, the initial investment in bonds should be recorded at the cost at which it was acquired, i.e., $515,000. Hence, the correct option is B.

Solo CorpPurchased $500,000 of Bonds for $515,000 as an Investment