Question

On May 1, 20Y6, Dean Company purchased $200,000 of Horton Company's 12% bonds at 100 plus accrued interest of $8,000. On June 30, 20Y6, Dean Company received its first semiannual interest. On February 1, 20Y7, Dean Company sold $160,000 of the bonds at 103 plus accrued interest. The journal entry Dean Company will record on February 1, 20Y7, will include a

Answer 1

Answer:

Credit to gain on sale of investment for 4,800

Explanation:

Preparation of the journal entry Dean Company will record on February 1, 20Y7

Based on the information given we were told that the company made purchased of the amount of $200,000 of Horton Company's at 12%, while On February 1, 20Y7, we were told that the Company sold the amount of $160,000 of the bonds , this mean the journal entry Dean Company will record on February 1, 20Y7 will be recorded as;

Credit to gain on sale of investment for 4,800

(12%*200,000)=$24,000

(12%*160,000)=$19,200

Hence

$24,000-$19,200=$4,800 which is the credit amount of the gain on sale of the investment.