Question

On June 1, $300,000 of bonds were purchased as a long-term investment at 101, or $303,000 and $500 was paid as the brokerage commission. If the bonds bear interest at 12%, which is paid semiannually on January 1 and July 1, what is the total cost to be debited to the investments account?

Answer 1

debit investment on debt securities 303,500 debit

credit cash by 303,500

Step-by-step explanation:

according to the accounting principles we should value the asset as the sum of all the incurred cost to leave it ready to use or to transfer the complete ownership

In this case, the company pay up 303,000 dollar for the bonds and then also paid a 500 dollar commision In total 303,500 are the cost to acquire the bond

At this amount they should be recorded in the accounting.