For Each of the Following Transactions Related to Held-To-Maturity Debt

question 92

Essay

For each of the following transactions related to Held-to-Maturity Debt securities,state the following:
(1)Which account(s)is (are)increased?
(2)Which account(s)is (are)decreased?
(3)What is the net effect on total assets and total equity? This net effect can be increase,decrease,or no net effect.
Transaction:
a.The investment was purchased at $50,000 (face value)plus brokerage fees of $2,000.
b.Semiannual interest of $1,500 was received.
c.The investment was disposed of at maturity.Cash in the amount of $50,000 was received.
$$\begin{array} { | l | l | l | l | } \hline \text { Transaction } & \begin{array} { c } \text { Account(s) } \\\text { Increased }\end{array} & \begin{array} { c } \text { Account(s) } \\\text { Decreased }\end{array} & \begin{array} { c } \text { Total Assets and } \\\text { Total Equity: } \\\text { Increase, Decrease, } \\\text { or No Net Effect }\end{array} \\\hline \mathbf { a } & & & \\\hline \mathbf { b } & & & \\\hline \mathbf { c } & & & \\\hline\end{array}$$

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Definitions:

Business Entity Assumption

An accounting principle that treats a business as an entity separate from its owners, meaning its financial transactions are recorded distinctly from those of its owners or other businesses.

Economic Unit

An entity, such as an individual, household, or organization, considered in economic analysis and decision-making.

FASB

Financial Accounting Standards Board, an organization responsible for establishing accounting and financial reporting standards in the U.S.

Federal Statutes

Laws passed by the national government of a country that are applicable throughout the country.