Accruex Corporation has excess cash of $25,000 and invests the same amount in corporate bonds on March 30, 2015. The bonds will mature in two years from the date of purchase. The company plans to use the cash from the bonds for its business expansion after the bonds mature in 2017. Based on the information provided, which of the following will be included in the journal entry on March 30, 2015?

Question

Quizplus · Accepted Answer

The bonds are held for two years and will be used for business expansion after they mature. Therefore, the investment should be recorded as a long-term investment held to maturity. The other options, short-term investments or available-for-sale investments, do not accurately reflect the intent of the investment or its expected holding period. There is no indication that the investment is in US Treasury Notes, so option B is incorrect. Option D is incorrect because it suggests a credit entry, but an investment in corporate bonds would require a debit entry.

Accruex Corporation Has Excess Cash of $25,000 and Invests the Same