On May 1, 2014, Gigajoule Company Paid $180,000 to Purchase

Essay

On May 1, 2014, Gigajoule Company paid $180,000 to purchase $200,000 of bonds that carry a 5% contract rate of interest and will mature in 5 years from the date of purchase. Interest on the bonds is paid May 1 and November 1 of each year. Gigajoule Company is a private company that prepares its financial statements in accordance with ASPE. It plans to hold the bonds until maturity and amortizes the premium or discount on bonds using the straight-line method each interest payment date. As of December 31, 2014, the bonds had a market value of $185,000.
a. Prepare all necessary journal entries for 2014 dealing with the investment in bonds.
b. Show how the bonds would be presented on the balance sheet dated December 31, 2014.