When Robinson Company records the purchase of the Bush Corporation bonds, what is the correct journal entry?

When Robinson Company purchases bonds from Bush Corporation, it needs to record the transaction in its accounting books to reflect the asset acquired. The correct recording involves recognizing the purchase price of the bonds as a debt investment.

In this case, the entry specifies a debit to Debt Investment for the amount of $92,278, which reflects the cost of the bonds acquired. This account is important because it recognizes the investment in Bush Corporation as an asset that will yield future economic benefits, such as interest income. The corresponding credit to Cash indicates that this amount has been paid for the investment.

The purchase price may be less than the face value of the bonds, which often occurs if the bonds are bought at a discount. This entry accurately portrays the financial position of Robinson Company by showing the increase in assets through the purchase of the investments and a decrease in assets due to the cash outflow.