A short-term investment in a U.S.Treasury bill costs $48,800 and will mature six months later at $50,000.Management intends to hold the investment until it matures.The entry to record the initial investment is:

Question

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The entry to record the initial investment in a U.S.Treasury bill is to debit Short-Term Investments account for $48,800 and credit Cash account for $48,800. This is because the company has paid $48,800 for the investment. Option A is incorrect because the investment matures at $50,000, which is not the initial cost of the investment. Option B is incorrect because the company has paid $48,800 for the investment, not $50,000. Option D is incorrect because it records interest income which has not yet been earned.

A Short-Term Investment in a U