Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:A. the debt securities should be recorded at the cost$300000

B. the securities will have a maturity value of $300000

C. the semiannual interest payment amount is $12000

D. the semiannual interest payment amount is $24000

E. interest revenue should be credited when an interest paymen is received

Question

Business

Chaim Shah

9 November, 11:27

Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value. Interest payments are made semiannually. All of the following regarding accounting for the securities are true except:A. the debt securities should be recorded at the cost$300000

B. the securities will have a maturity value of $300000

C. the semiannual interest payment amount is $12000

D. the semiannual interest payment amount is $24000

E. interest revenue should be credited when an interest paymen is received

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Answers (1)

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Nelson Vincent · Answer 1

D. the semiannual interest payment amount is $24000

Explanation:

Debt securities are recorded on the purchase price of the securities which includes purchase price and any brokerage costs etc. Cost recorded and maturity value of this security will be $300,000 because these are issued on par and will mature on par value. The semiannual interest payment will be $12,000 ($300,000 x (8% / 2)) rather than $24,000. Interest revenue will also be credited to the interest revenue account. So the only incorrect option is D. the semiannual interest payment amount is $24000.