Prepare the required journal entries for Sweetwater Ltd

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Reference no: EM132742033

Question - The following bond transactions occurred during 2021 for the University of Higher Learning (UHL) and Sweetwater Ltd.:

Feb. 1 UHL issued $10.2 million five-year, 4% bonds at 97 (this means 97% of face value) at a price to yield a market interest rate of 4.7%. The bonds pay interest semi-annually on August 1 and February 1. Sweetwater Ltd. purchased $3.1 million of UHL's bonds at 97 as a long-term investment to be held to maturity.

Aug. 1 UHL paid the semi-annual interest on the bonds.

Required -

(A) Prepare the required journal entries for Sweetwater Ltd., the investor, to record the above transactions.

(B) How would the journal entries for Sweetwater Ltd. change if it purchased the investment for trading purposes?

Reference no: EM132742033

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