Insurance companies and pension plans hold large quantities of bond investments. Rainy Day Corp. purchased $1,500,000 of 8% bonds of Quantrill, Inc., for 95 on January 1, 2018. These bonds pay interest on January 1 and July 1 each year. They mature on January 1, 2022. Rainy Day’s fiscal year end is October 31.

Requirements

1. Journalize Rainy Day’s purchase of the bonds as a long-term investment on January 1, 2018 (to be held to maturity), receipt of cash interest, and amortization of the bond discount at July 1, 2018. The straight-line method is appropriate for amortizing the bond investment.

2. Journalize the accrual of interest receivable and amortization of the discount on October 31, 2018 (round answer to the nearest whole number).