A short-term investment in a U.S.Treasury bill costs $48,400 and will mature in six months at $50,000.Management intends to hold the investment until it matures.The entry to record receipt of cash at maturity is: (No prior entries were made to recognize revenue.)

Question

Quizplus · Accepted Answer

Management intends to hold the investment until it matures, therefore, it is classified as held-to-maturity securities. The investment was bought at $48,400 and will mature at $50,000, which means the interest income for six months is $1,600 ($50,000 - $48,400). Therefore, the correct entry to record receipt of cash at maturity is Cash $50,000, Short-Term Investments $48,400, and Interest Income $1,600.

A Short-Term Investment in a U