Answer:
A. Dr Investment in Bonds 200,000
Cr Cash 200,000
B. Dr Cash 6,000
Cr Interest revenue 6,000
C. Dr Cash 67,900
Dr Loss on sale of bonds 2,100
D. Dr Interest receivable 1,300
Cr Interest revenue 1,300
Explanation:
A. Preparation of the Journal entry to record The initial acquisition of the bonds on May 1
Dr Investment in Bonds 200,000
Cr Cash 200,000
B. Preparation of the journal entry to Record The semiannual interest received on November 1 Nov
Dr Cash 6,000
[ 200,000 (100%-97%)
Cr Interest revenue 6,000
C. Preparation of the journal entry to Record The sale of the bonds on November 1.
Dr Cash 67,900
( 70,000 * 97%)
Dr Loss on sale of bonds 2,100
(70,000-67,900)
Cr Investment in Bonds 70,000
D. Preparation of the journal entry to Record
The accrual of $1,300 interest on December 31. Dec. 31
Dr Interest receivable 1,300
Cr Interest revenue 1,300
