Table 16-4
Parson Products Inc. purchased $186,000, 10%, five-year bonds to hold until maturity. The bonds were purchased on July 1, 2017 at market value which was 103, and will mature on July 1, 2022. Interest payment dates are June 30 and December 31. Parson uses the straight-line method to amortize any bond discount or premium.
-Refer to Table 16-4.What is the debit to Investment in Bonds at July 1,2017?

Question

Quizplus · Accepted Answer

To find the debit to Investment in Bonds at July 1, 2017, we need to calculate the cost of the bonds which includes the purchase price and any accrued interest from the last interest payment date. 
Purchase price = $186,000 x 103% = $191,580 
Since no accrued interest is given, we can assume that the last interest payment date was on June 30, 2017. Therefore, there is no accrued interest at the time of purchase on July 1, 2017. 
Thus, the debit to Investment in Bonds at July 1, 2017 is the cost of the bonds which is $191,580. 
Therefore, the best choice is B as it correctly calculates the cost of the bonds at the time of purchase.

Table 16-4 Parson Products Inc. Purchased $186,000, 10%, Five-Year Bonds to Hold