Question

jerome, incorporated, paid $8,850 to make a debt investment in trading securities of tedesco, incorporated. on december 30, (within the same fiscal year), jerome sold some of these debt securities that had a cost of $6,500 for $7,000 cash. complete the necessary adjusting entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

The adjusting entry for the sale of debt securities by Jerome Incorporated on December 30, is as follows:

Adjusting Journal:

December 31:

Debit Cash $7,000

Credit Investment $6,500

Credit Gain on Sale of Investment $500

• To record the sale of debt investment (part) and the gain therefrom.

What is an adjusting entry?

An adjusting entry is the journal entry made at the end of the financial year to ensure compliance with the accrual concept and the matching principle of generally accepted accounting principles.

An adjusting entry does not include the initial investment transaction made by Jerome Incorporated.

Transaction Analysis:

Dec. 30:

Cash $7,000  Investment $6,500 Gain on Sale of Investment $500

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