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Question
General Investment Co. (GIC) purchased bonds on January 1, 2015. GIC's accountant has projected the following amortization schedule from purchase until maturity:
| Date | Cash Paid | Interest Expense | Increase in Carrying Value | Carrying Value |
| 1/1/15 | $194,758 | |||
| 6/30/15 | $7,000 | $7,790 | $790 | 195,548 |
| 12/31/15 | 7,000 | 7,822 | 822 | 196,370 |
| 6/30/16 | 7,000 | 7,855 | 855 | 197,225 |
| 12/31/16 | 7,000 | 7,889 | 889 | 198,114 |
| 6/30/17 | 7,000 | 7,925 | 925 | 199,039 |
| 12/31/17 | 7,000 | 7,961 | 961 | $200,000 |
Recording the bond purchase would have what effect on the financial statements?
a. Increase assets.
b. Increase liabilities.
c. Increase assets and liabilities.
d. No effect on total assets and total liabilities.
Answer
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