Effects of long-term bond investment on morgan stanley

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Accounting for a bond investment purchased at a discount) Financial institutions hold large quantities of bond investments. Suppose Morgan Stanley purchases $500,000 of 6% bonds of General Components Corporation for 96 on January 31, 20X0. These bonds pay interest on January 31 and July 31 each year. They mature on July 31, 20X8. At December 31, 20X0, the market price of the bonds is 93.

Required

1. Journalize Morgan Stanley's purchase of the bonds as a long-term investment on January 31, 20X0 (to be held to maturity), receipt of cash interest and amortization of the bond investment on July 31, 20X0, and accrual of interest revenue and amortization at December 31, 20X0. The straight-line method is appropriate for amortizing the bond investment.

2. Show all financial statement effects of this long-term bond investment on Morgan Stanley's balance sheet and income statement at December 31, 20X0.

Reference no: EM13548925

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