Answer and Explanation:
The Journal entries is shown below:-
Jan 31
Investment in Govt Bonds Dr, $75,000
Interest Receivable Dr, $375
To Cash 75,375
(Being cash is recorded)
July 31
Cash Dr $2,250
To Interest Receivable $375
To Interest Income 1,875
($75000 × 6% × 5 ÷ 12)
(Being interest on bond is recorded)
Aug 30
Cash Dr, $34,650
Loss on Sale of Bonds Dr, $700
($35,000 - 980 × $35)
To Investment in Govt Bonds $35,000
To Interest Income $350
(Being loss on sale is recorded)
Dec 31
Interest Receivable Dr, $1,200
To Interest Income $1,200
(40 × $1,000 × 6% × 6 ÷ 12)
(Being interest on bonds is recorded)
