Question

Journalize the entries to record the following selected bond investment transactions for Starks Products: If an amount box does not require an entry, leave it blank. a. Purchased for cash $66,000 of Iceline, Inc. 9% bonds at 100 plus accrued interest of $990

Answer 1

Answer:

The journal entries are:

Dr Bond Receivable      66,000

Dr Interest Receivable   990

Cr Cash                          66,990

(to record the purchase of Iceline, Inc. 's bonds)

Explanation:

The purchase include the following deliverables:

+ The bond at the price of $66,000

+ The interest receivables that the seller(s) is/are eligible to receive, yet, they transfer the rights to the buyers. This amount is recorded at $990 as Buyer's receivable because as bond holder, Buyers are eligible to receive that. Noted that this is not qualified to be recorded as Interest Income for Bond's Buyers because the Buyers do not hold the bond at all before the purchase, thus, they should not recorded any interest income from the coupon receipt.

=> Total Cash spent for the purchase is $66,990 ( $66,000 + $990).