Question

Starbucks Corporation provides high- quality coffee products. Assume that as part of its expansion strategy, Starbucks plans to open numerous new stores internationally over the next five years. The company has US$ 5 million to support the expansion and has decided to invest the funds in corporate bonds until the money is needed. Assume that Starbucks purchased bonds with US$ 5 million face value at par for cash on July 1, 2014. The bonds pay 8 percent interest each June 30 and December 31 and mature in five years. Starbucks plans to hold the bonds until maturity.
Required:
1. What accounts are affected when the bonds are purchased on July 1, 2014?
2. What accounts are affected when interest is received on December 31, 2014?
3. Should Starbucks prepare a journal entry if the market value of the bonds decreases to US$ 4 million on December 31, 2014? Explain.


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  • CreatedAugust 04, 2015
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