Test question: On July 31, 2012, Buddy’s Bathtub Renovations Inc. invested $98,000 in U.S. Treasury bills. The bills mature in 120 days at $100,000. Prepare a journal entry

To prepare a journal entry for the investment in U.S. Treasury bills, you need to understand the basic principles of accounting and the specific accounts involved in this transaction.

Here's how you can approach it step-by-step:

1. Identify the accounts involved:
- Cash/Bank: This account will reflect the initial investment of $98,000
- U.S. Treasury Bills: This account will be used to record the investment in the bills

2. Determine the journal entry type:
- Since Buddy’s Bathtub Renovations Inc. is making an investment, it is considered an asset acquisition. Therefore, this will be a debit-credit entry.

3. Determine the amounts for each account:
- Cash/Bank (Debit): $98,000 - This is the amount of cash being used to purchase the Treasury bills.
- U.S. Treasury Bills (Credit): $98,000 - This is the initial value of the investment.

The journal entry would look as follows:

Date: July 31, 2012
Account Debit Credit
--------------------------------------------
Cash/Bank $98,000
U.S. Treasury Bills $98,000

Please note that the above journal entry assumes that there are no transaction costs or fees associated with the purchase of the Treasury bills. If there were any additional costs, they would need to be accounted for accordingly.