Question

League Up ​& Co. owns vast amounts of corporate bonds. Suppose League Up buys $ 900 comma 000 of CocoCorp bonds at face value on January​ 2, 2018. The CocoCorp bonds pay interest at the annual rate of 8​% on June 30 and December 31 and mature on December​ 31, 2022. League Up intends to hold the investment until maturity. Read the requirementsLOADING.... Requirement 1. How would the bond investment be classified on League Up's December​ 31, 2018​, balance​ sheet? The CocoCorp bond investment will be classified as a long-term asset as of December​ 31, 2018. Requirement 2a. Journalize on League Up's ​books: Receipt of final interest payment on December​ 31, 2022

Answer 1

See the explanation for the answers.

Step-by-step explanation:

Held to maturity debt investments are the debt investment held till the maturity. This type of investment can be both current and non-current depending upon the time from date of purchase till the date of maturity. Investment whose maturity date is within 12 months from the date of purchase are classified under current assets. where as investment whose maturity date falls beyond 12 months are classified under long term assets.

1. The bonds are held for maturity from January 2018 to December 2022. The maturity date falls after 4 years.

Accordingly, the debt investments are classified under assets section as long term investments up to December, 2020. For balance sheet on December 2021, the investment is classified as a short term investment under the current assets section.

2a Record the journal entries in the following manner:

Date Account title/explanation Debit Credit

31 Dec. 2022 Cash $36,000

Interest revenue $36,000

[900,000*8*(6/12)]

[To record the final

interest payment]

2b)

Date Account title/explanation Debit Credit

31 Dec. 2022 Cash $900,000

Long term investment $900,000

held to maturity

[To record the disposition

of investment held to maturity]