Question

Temper Co. purchased 60, 6% Irick Company bonds for $60,000 cash plus brokerage fees of $600. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000 less $300 brokerage fees, the entry would include a credit to Gain on Sale of Debt Investments for:_______________.
a. $2,000.
b. $1,700.
c. $2,300.
d. $1,400.

Answer 1

Answer:

d. $1,400.

Explanation:

The computation of the gain on sale of debt investment is shown below:

Gain on sale of debt investment = Sale price - purchase price

where,

Sale price = $32,000 - $300 = $31,700

And, the purchase price is

= (60,000 + $600) × 30 days ÷ 360 days

= $30,300

Now the gain on sale of debt investment is

= $31,700 - $30,300

= $1,400