Concept explainers
Gillooly Co. purchased $81,000 of 5%, 15-year Lumpkin County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Gillooly Co. sold $30,000 of the Lumpkin County bonds at 102 plus $125 accrued interest less a $670 brokerage commission.
a. The purchase of the bonds on May 11 plus 40 days of accrued interest.
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b. Semiannual interest on October 1.
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c. Sale of the bonds on October 31.
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d.
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e. The receipt of the face value of the remaining bonds at their maturity on April 1, Year 20.
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Bonds are debt securities issued by governments, municipalities, corporations, or other entities to raise capital. When you purchase a bond, you are essentially lending money to the issuer in exchange for periodic interest payments (referred to as coupon payments) and the return of the bond's face value (also known as the principal or par value) at a specified future date, known as the bond's maturity date.
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