Question

On December 31, 20X2, an insurance company purchased $10 million of 10-year, 10% debentures for $8,852,950. On December 31, 20X3 (after all interest payments and amortization had been recorded for 20X3), the insurance company sold all the debentures for $9.2 million. The market interest rate at purchase when the bonds were issued was 12%. Interest payments are semiannual.
1. Compute the gain or loss on the sale for the insurance company (i.e., the investor).
2. Prepare the appropriate journal entries for the insurance company (i.e., the investor).



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  • CreatedFebruary 20, 2015
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