Question

A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:

Answer 1

Acount Description	Debit	Credit
Investment in Bond*	38,325
Cash		38,325
(Being Bond Purchased)

* 37,500+525 = 38,325

If Investment is Purchased to be Held for Maturity then the Cost of Purchase (Brokerage Paid) i.e incidental cost will also be included in the Acquisition cost of Investments.

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