starbucks is a rapidly expanding company that provides high qual 257024

Starbucks is a rapidly expanding company that provides high-quality coffee products. Assume that as part of its expansion strategy, Starbucks plans to open numerous new stores in Mexico in five years. The company has $5 million to support the expansion and has decided to invest the funds in corporate bonds until the money is needed. Assume that Starbucks purchased bonds with $5 million face value at par for cash on July 1, 2011. The bonds pay 8 percent interest each June 30 and December 31 and mature in five years. Starbucks plans to hold the bonds until maturity.

Required:

1. What accounts are affected when the bonds are purchased on July 1, 2011?

2. What accounts are affected when interest is received on December 31, 2011?

3. Should Starbucks prepare a journal entry if the market value of the bonds decreased to $4,000,000 on December 31, 2011? Explain.

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