Albright Company purchased as a long-term investment $500,000 of Benton Corporation 10-year 9% bond present entries to record the following selected transactions: (a.) Purchased bonds for $475,000.
To record the purchase of the bonds for $475,000, the following journal entry should be made:
Date: [date of purchase]
Debit: Bonds payable (long-term investment) - $475,000
Credit: Cash - $475,000
In this entry, the debit represents the increase in the Bonds payable (long-term investment) account, reflecting the purchase of the bonds. The credit represents the decrease in the Cash account due to the cash payment made for the purchase.
To record the purchase of bonds for $475,000 by Albright Company as a long-term investment, you need to create an entry in the accounting books. Here is an explanation of how to record this transaction:
1. Identify the accounts involved:
- Long-term investment (Asset account)
- Cash (Asset account)
2. Determine the appropriate journal entry format:
- The debit side will include the Long-term investment account.
- The credit side will include the Cash account.
3. Determine the amounts for the entry:
- The Long-term investment account will be debited with the purchase price of the bonds, $475,000.
- The Cash account will be credited with the same amount, $475,000.
4. Create the journal entry:
Debit Long-term investment $475,000
Credit Cash $475,000
5. Explanation of the entry:
By debiting the Long-term investment account, we are increasing the value of this asset on the company's balance sheet. We are recording the purchase of the bonds as a long-term investment because Albright Company intends to hold them for a period exceeding one year.
By crediting the Cash account, we are reducing the amount of available cash in the company. The $475,000 cash is used to purchase the bonds.
Remember that the amounts and accounts used in this explanation may vary depending on the specific circumstances and the account structure established by the company.