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What entry should Lucky Company make

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Question - On September 1, Year 2, the Lucky Company acquired ?1,000,000 face value, 12% bonds of Key Company at 104. The bonds were dated May 1, Year 2, and mature on April 1, Year 5, with interest payable each October 31 and April 30. The Company did not elect to measure the securities of fair value. What entry should Lucky Company make to record the purchase of the bonds on September 1, Year 2?

Debit: Debit Investments - 1,040,000, Interest Receivable - 40,000; Credit: Cash - 1,080,000

Debit: Debit Investments - 1,080,000; Credit: Cash - 1,080,000

Debit: Debit Investments - 1,080,000; Credit: Interest receivable - 40,000, Cash - 1,040,000

Debit: Debit Investments - 1,000,000, Premium on Debt Investment - 80,000; Credit: Cash - 1,080,000

Reference no: EM132664622

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