Question

Entries for Investment in Bonds, Interest, and Sale of Bonds Gonzalez Company acquired $200,000 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $70,000 of the bonds for 97. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

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