**Answer:**

**Explanation:**

The journal entries are shown below:

a)
Investment in bonds Dr A/c$120000

Interest receivable Dr A/c$ 1000

To Cash A/c $121000

(purchased of 5% bonds with accrued interest of $1000 on the bonds for cash is recorded)

b)
Cash Dr. A/c $3000 ** ($120,000 × 5% × 6 months ÷ 12 months)**

To Interest receivable A/c $1000

To Interest Revenue A/c $2000

(Being the first semiannual interest payment is received)

c) Cash Dr A/c $61100 **($60,000 × 101 + $500)**

To Investment in bonds $60000

To Interest Revenue $ 500

To Gain in sale of investment $600

( Being the sale of bond with accrued interest of $500 is recorded and the remaining amount will be credited to the gain in sale of investment)