Landmark Corp.buys $300,000 of Schroeter Company's 8%,5-year bonds payable,at par value on September 1.Interest payments are made semiannually.Landmark plans to hold the bonds for the 5-year life.When the bonds mature,the journal entry to record the proceeds will be:

A) Debit Long-Term Investments-HTM $300,000; credit Cash $300,000.
B) Debit Cash $300,000; credit Interest Revenue $300,000.
C) Debit Cash $300,000; credit Debt Investments-HTM $300,000.
D) Debit Cash $300,000; credit Interest Receivable $300,000.
E) Debit Cash $300,000; credit Bonds Payable $300,000.

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Steven Davis · Accepted Answer

Final Answer : C, Explanation :  When the bonds mature, Landmark will receive the principal amount of $300,000 from Schroeter Company. Landmark had initially recorded the bonds at their cost of $300,000. Therefore, the journal entry to record the proceeds will be a debit to Cash for $300,000 and a credit to Debt Investments - HTM (Held-to-Maturity) for $300,000. This will result in the elimination of the bond investment from Landmark's balance sheet.

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