Insurance companies and pension plans hold large quantities of bond investments. Discount insurance corp purchased 2,100,000 of 6.0% bonds of soucy inc. for 116 on jan 1,2012. these bonds pay interest in jan 1 and july 1 each year. they mature on january 1, 2016. at october 31,2012 the end of the fiscal year the market price is 109.
1. Journalize discounts purchase of the bonds as a long term investment on january 1, 2012 to be held to maturity, receipt of cash interest and amoritztion of the bond investment at july 1 2012. the straight method is appropiate for amortizing the bond investment.
2. Journalize the accrual of interest receivable and amortization of premium on october 31st 2012. roud of the nearest whole number.
3. Show all financial statement effects of this long term bond investment on discount insurance corps. balance sheet and income statement on oct 31, 2012.