Answer:
Nov 1 2018
Dr Bonds receivable 700,000
Cr Cash 67,3618.61
Cr Discount on bonds receivable 26,381.39
April 3 2019
Dr Cash 35,000
Dr Discount on bonds receivable 2,049.02
Dr Interest revenue 37,059.02
Oct 31, 2019
Dr Cash 35,000
Dr Discount on bonds receivable 2,049.02
Cr Interest revenue 37,059.02
Nov 1, 2019
Dr Cash 700,000
Dr Discount on bonds receivable 22,283.25
Cr Notes receivable 700,000
Cr Profit on sale bonds receivable 22,283.25
Explanation:
Preparation of the journal entries to record the following:
Purchase of the bonds
Interest receipts on April 30, 2019 and October 31, 2019
Sale of the bonds.
Journal entries
Nov 1 2018
Dr Bonds receivable 700,000
Cr Cash 67,3618.61
Cr Discount on bonds receivable 26,381.39
(700,000-67,3618.61)
(To record Purchase of bonds)
April 30 2019
Dr Cash 35,000
(700,000*10%*6/12)
Dr Discount on bonds receivable 2,049.02
(37,059.02-35,000)
Dr Interest revenue 37,059.02
(673,618.61*11%*6/12)
(To record Interest receipts)
Oct 31, 2019
Dr Cash 35,000
Dr Discount on bonds receivable 2,049.02
(37,059.02-35,000)
Cr Interest revenue 37,059.02
(673,618.61*11%*6/12)
(To record Interest receipts)
Nov 1, 2019
Dr Cash 700,000
Dr Discount on bonds receivable 22,283.25
($26,381.39-$2,049.02-$2,049.02)
Cr Notes receivable 700,000
Cr Profit on sale bonds receivable 22,283.25
(To record Sale of the bonds)
