(Answered) Grange company purchased as a held-to-maturity investment

Accounting

Grange Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chaps Corporation for $74,086, which provides an 11% return. Prepare Grange's journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.

(a) Debt Investments (Held-to-Maturity)................................................. 74,086

Cash............................................................................................ 74,086

(b) Cash ($80,000 X .09)............................................................................ 7,200

Debt Investments (Held-to-Maturity)................................................. 949

Interest Revenue ($74,086 X .11).............................................. 8,149

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