On January 1,2014,Newark Corp.paid $60,000 plus a brokerage fee in the amount of $600 to buy Escalade's 8%,two-year bonds payable with a $60,000 par value.Newark intended to hold the bonds until their maturity date of December 31,2016.At maturity,Newark received the bond proceeds (not including the interest,which had already been paid).How would the company record the receipt of the proceeds at maturity?
A)Debit Cash for $60,000 and credit Short-Term Investments-HTM (Escalade) for $60,000.
B)Debit Cash for $60,600 and credit Short -Term Investments-HTM (Escalade) for $60,600.
C)Debit Cash for $60,000 and credit Long-Term Investments-HTM (Escalade) for $60,000
D)Debit Cash for $60,600 and credit Short -Term Investments-HTM (Escalade) for $60,600
E)Debit Cash for $60,000,debit Loss on Long-Term Investments-Income for $800,and credit Long-Term Investments-HTM (Escalade) for $60,000.

Question

Quizplus · Accepted Answer

The bonds were held to maturity, so the company would debit Cash for the par value of $60,000 and credit Long-Term Investments-HTM for the same amount. The brokerage fee is not included in the maturity proceeds.