On July 1, 2011, ABC Grocers, Inc. purchased an investment in the 5 yr 10@ (stated rate) debt securities with a face value of $400,000 of Brighton Corporation, a publicly traded company. At the time of purchase the market interest rate for similar risk debt was 8%. Interest is to be received semi-annually beginning December 31, 2011. ABC intends to hold the investment to maturity but if the market interest rate drops significantly the Company would consider selling the investment. Holding the investment to maturity is not part of ABC’s investing strategy or business model. Assume the market interest rate for similar risk securities is 9% at 12/31/11.

Question

On July 1, 2011, ABC Grocers, Inc. purchased an investment in the 5 yr 10@ (stated rate) debt securities with a face value of $400,000 of Brighton Corporation, a publicly traded company. At the time of purchase the market interest rate for similar risk debt was 8%. Interest is to be received semi-annually beginning December 31, 2011. ABC intends to hold the investment to maturity but if the market interest rate drops significantly the Company would consider selling the investment. Holding the investment to maturity is not part of ABC’s investing strategy or business model. Assume the market interest rate for similar risk securities is 9% at 12/31/11.
Required: Record  the journal entry for the purchase of the investment on July 1st, receipt of interest, and record necessary adjusting journal entries and also prepare a trial balance worksheet for 12/31/11.