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Ownbey Corporation purchased debt investments for $57,000 on January 1, 2017. On July 1, 2017,...

Question:

Ownbey Corporation purchased debt investments for $57,000 on January 1, 2017. On July 1, 2017, Ownbey received cash interest of $3,800.

Journalize the purchase and the receipt of interest. Assume that no interest has been accrued.

Debt investment

Debt investment is equivalent to the loan or advance given, the difference is that in such kind of investment, a more sophisticated instrument like bon,debentures etc. is initiated, in other words the purchaser of these statements is the lender and the seller is called borrower.

Answer and Explanation:

Journal entries

1) January 1st 2017

investment Dr. $57000

Cash Cr $57000

( being investments purchased)


2) July 1st 2017

Cash Dr $3800

Interest income Cr $3800

( being interest received)


Learn more about this topic:

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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7
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