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28 June, 19:57

Prepare journal entries to record the following transactions involving the short-term securities investments of Natura Co., all of which occurred during year 2017. On June 15, paid $1,000,000 cash to purchase Remedy's 90-day short-term debt securities ($1,000,000 principal), dated June 15, that pay 10% interest (categorized as held-to-maturity securities). On September 16, received a check from Remedy in payment of the principal and 90 days' interest on the debt securities purchased in transaction a. (Use 360 days in a year. Do not round your intermediate calculations.)

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  1. 28 June, 21:41
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    short-term securities 1,000,000 debit

    cash 1,000,000 credit

    ---to reocrd purchase---

    cash 1,025,000 debit

    interest revenue 25,000 credit

    short-term securities 1,000,000 credit

    - - to record collection---

    Explanation:

    calculus of interest:

    principal x rate x time = interest

    Is important to notice we must express rate and time in the same metric, so time will be express a a portion of the year instead of 90 days:

    1,000,000 x 10% x 90/360 = 25,000
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