Financial institutions such as insurance companies and pension plans hold large quantities of bond investments. Suppose Meridian
Question:
Financial institutions such as insurance companies and pension plans hold large quantities of bond investments. Suppose Meridian Credit Union purchases $2,000,000 of 3.0 percent bonds of the Province of Manitoba at 105 on January 1, 2020. These bonds pay interest on January 1 and July 1 each year. They mature on January 1, 2030. Meridian plans to hold the bonds to maturity.
Required
1. Journalize Meridian’s purchase of the bonds as a long-term investment on January 1, 2020. Disregard brokerage commissions.
2. Journalize the receipt of cash interest and amortization of premium on July 1, 2020. Assume the straight-line method is appropriate for amortizing the premium as there is no material difference from the effective-interest method
3. Record the accrual of interest revenue and amortization of premium at October 31, 2020, the fiscal year-end.
4. Calculate the book value of Meridian’s investment in the Province of Manitoba bonds at October 31, 2020.
Step by Step Answer:
Horngrens Accounting
ISBN: 9780135359785
11th Canadian Edition Volume 2
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann Johnston, Peter R. Norwood