Response to the following problem:
Financial institutions hold large quantities of bond investments. Suppose Goldman Sachs purchases $800,000 of 8% bonds of Xerox Corporation for 92 on January 1, 20X0. These bonds pay interest on January 1 and June 30 each year. They mature on January 1, 20X8.
Required:
1. Journalize Goldman Sachs' purchase of the bonds as a long-term investment on January 1, 20X0 (to be held to maturity), receipt of cash interest, and amortization of discount on June 30 and December 31, 20X0. The straight-line method is appropriate for amortizing discount.
2. Show how to report this long-term bond investment on Goldman Sachs' balance sheet at December 31, 20X0.