Question 9 of 16 1000 points Lance Brothers Enterprises acqu

Question 9 (of 16) 10.00 points Lance Brothers Enterprises acquired S770.000 of 5% bonds, dated July 1, on July 1, 2016, as a long term investment. Management has the positive intent and ability to hold the bonds until matunity. The market nterest rate (yed) was 6% for bonds of similar risk and maturity Lance Brothers paid S690.000 for the nvestment in bonds and will receive interest semiannually on June 30 and December 31 Prepare the joumal entries (a) to record Lance Brothers\' investment in the bonds on July 1,2016, and (b) to record interest on December 31, 2016, at the effective (market) rate. (If no entry is required for a transactionlevent, select \"No journal entry required\" in the first account field) View transaction list Record Lance Brothers\' investment in the bonds on July 1, 2016 1 Record interest on December 31, 2016, at the effective (market) rate 2 Note : -journal entry has been entered esc F7 2 4

Solution

Date Explanation Debit Credit 07/01/2016 Investment in bonds 770000 Discount on bond investment 80000 Cash 690000 12/31/2016 Cash 19250 Discount on bond investment 1450 Investment revenue 20700 770000*5**6/12 690000*6%*6/12 2 Pre tax Amount 2016 No gain/loss in earnings 2017 Gain 2000 Unlike for trading securities, unrealized holding gains and losses for securities available-for-saleare notincluded in earnings. S&L reports its $3,500 holding loss in 2016 as other comprehensive income in the statement of comprehensive income.