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Financial Accounting

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Discount of Held-to-Maturity Investment

FINACT-NESYLG

Smithsonian Co. purchased a \$100,000 par value, 10% bond on January 1, 2015. The maturity date of the bond is January 1, 2018. The company purchased the bond for a discount by paying \$95,196. Interest on the bond will be paid on July 1 and January 1 every year. The company had the intention and the ability to hold the investment to the maturity date. The company used the straight-line method to amortize any discount or premium.

(I): On July 1, 2015, what is the recognized interest revenue (in dollars to the second decimal place)?

(II): On July 1, 2015, what is the amount of bond investment reported on the balance sheet (in dollars to the second decimal place)?