On January 1,2015,Corbin Company purchases $100,000,5% bonds at a price of 99 and a maturity date of January 1,2025.Corbin Company intends to hold the bonds until their maturity date.Interest is paid semiannually,on January 1 and July 1.Corbin Company has a calendar year end.The entry to amortize the bond investment on July 1,2015 is:

Question

Quizplus · Accepted Answer

The entry to amortize the bond investment on July 1, 2015, would involve recording the semi-annual interest earned on the bonds. Since the bonds were purchased at a discount, the interest income earned each period will be higher than the cash received from the bond issuer. The entry would involve debiting the Held-to-Maturity Investment in Bonds account for the amortized portion of the discount, which is $50 ($100,000 x 5% x 6/12 x 1/2), and crediting the Interest Revenue account for the same amount. Therefore, Choice C is correct.

Choice A is incorrect because it only records the interest receivable and not the amortization of the bond discount.

Choice B is incorrect because it records the entire cash received from the bond issuer as interest revenue, without taking into account the bond discount.

Choice D is incorrect because it overstates the interest revenue earned on the bonds and does not account for the amortized discount.

On January 1,2015,Corbin Company Purchases $100,000,5% Bonds at a Price