Prepare journal entries to record the following transactions involving the short-term securities investments of Natura Co., all of which occurred during year 2017. On June 15, paid $1,000,000 cash to purchase Remedy's 90-day short-term debt securities ($1,000,000 principal), dated June 15, that pay 10% interest (categorized as held-to-maturity securities). On September 16, received a check from Remedy in payment of the principal and 90 days' interest on the debt securities purchased in transaction a. (Use 360 days in a year. Do not round your intermediate calculations.)

Question

Jan Soto

Business

19 February, 04:22

Prepare journal entries to record the following transactions involving the short-term securities investments of Natura Co., all of which occurred during year 2017. On June 15, paid $1,000,000 cash to purchase Remedy's 90-day short-term debt securities ($1,000,000 principal), dated June 15, that pay 10% interest (categorized as held-to-maturity securities). On September 16, received a check from Remedy in payment of the principal and 90 days' interest on the debt securities purchased in transaction a. (Use 360 days in a year. Do not round your intermediate calculations.)

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Scarlet Manning · Answer 1

short-term securities 1,000,000 debit

cash 1,000,000 credit

---to reocrd purchase---

cash 1,025,000 debit

interest revenue 25,000 credit

short-term securities 1,000,000 credit

- - to record collection---

Explanation:

calculus of interest:

principal x rate x time = interest

Is important to notice we must express rate and time in the same metric, so time will be express a a portion of the year instead of 90 days:

1,000,000 x 10% x 90/360 = 25,000