Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.The journal entry to record the purchase should include:

Question

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Long-Term Investments-HTM account should be debited for the purchase of the bonds, as the intent is to hold the bonds until maturity. This is because when investing in bonds, the company can choose to hold them until maturity (hold-to-maturity or HTM), sell them in the near future for a profit (trading), or hold them for other reasons (available-for-sale or AFS). Short-Term Investments would not be appropriate since the bonds have a 5-year maturity. Cash account should also be credited for the amount paid for the bonds.