Company A purchases U.S.Treasury bills for $23,700.This investment will be held to maturity.The bills will mature in 90 days at $24,000.The entry to record the initial investment will include a
A)credit to Short-Term Investments for $23,700.
B)debit to Short-Term Investments for $23,700.
C)debit to Short-Term Investments for $24,000.
D)credit to Interest Receivable for $300.

Question

Quizplus · Accepted Answer

When Company A purchases U.S. Treasury bills for $23,700, it will debit the Short-Term Investments account for the same amount. There is no need to credit any account at this point since it is a cash purchase. The Interest Receivable account is only used when the investment earns interest, which is not the case in this scenario. The entry to record the maturity of the bills would be a debit to Cash for $24,000 and a credit to Short-Term Investments for $23,700, with a credit to Interest Revenue for $300.

Company a Purchases U