Chapter 9
Investments
440
AP-4A (
1
2
)
Jenny Company, a public company, purchases a 120-day, $5,000,000 Canadian Government
T-bill on March 1, 2016, with a cash payment of $4,975,000. The T-bill pays 1.5% per year. As
part of the recent investment strategies, Jenny Company decided to make the best use of its
idle cash to earn extra profit. The company might sell this T-bill at any time before the maturity
date, should the market situation turn favourable. Assume that Jenny Company has a year-
end date of April 30.
Required
a) Which accounting method is most appropriate to record this investment and why?
b) Prepare journal entries for the purchase and year-end accrual.
Date
Account Title and Explanation
Debit
Credit
