The bonds may be held to maturity or sold

The bonds may be held to maturity or sold - example if one...

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The bonds may be held to maturity or sold. If they are held to maturity, the bonds are classified as a  long-term investment and the difference between the maturity value and the cost of the bonds is  amortized to the income statement over the life of the bonds. If the bonds are held for sale (not held  for maturity), their value changes as the market changes. At the time of the sale, a gain or loss is  recorded for the difference between the book value and the proceeds received from the sale. For 
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Unformatted text preview: example, if one of the bonds was sold for $1,050 on June 1, the entry would include a loss of $60, the difference between the cost of $1,110 ($5,550 total acquisition cost divided by 5 bonds acquired) and the proceeds of $1,050. General Journal Date Account Title and Description Ref. Debit Credit 20X1 June 1 Cash 1,050 Loss on Sale of Debt Investments 60 Debt Investments 1,110 Sale of one VEI bond...
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