Investment in Bonds at Premium
Illustrative Entries

 

1-1-X3

Investment in Bonds

  

 5,300

  
 

          Cash

    

5,300
  To record the purchase of five $1,000, 5%, 3-year bonds at 106 -- interest payable semiannually      

 

6-30-X3

Cash

  

 125

  
 

          Interest Income

    

75
 

          Investment in Bonds

    

50
  To record the receipt of an interest payment ($5,000 par X .05 interest X 6/12 months = $125; $300 premium X 6 months/36 months = $50 amortization)      

 

12-31-X5

Cash

  

 5,000

  
 

          Investment in Bonds

    

5,000
  To record the redemption of bond investment at maturity.