Question

Journalize the entries to record the following selected bond investment transactions for Hall Trust (refer to the Chart of Accounts for exact wording of account titles):
Apr. 1 Purchased for cash $240,000 of Medina City 6% bonds at 100 plus accrued interest of $3,600, paying interest semiannually.
June 30 Received first semiannual interest payment.
July 31
Sold $120,000 of the bonds at 98 plus accrued interest of $600.
CHART OF ACCOUNTSHall TrustGeneral Ledger
ASSETS
110 Cash
111 Petty Cash
120 Accounts Receivable
121 Allowance for Doubtful Accounts
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
161 Investments-Medina City Bonds
165 Valuation Allowance for Trading Investments
166 Valuation Allowance for Available-for-Sale Investments
181 Land
193 Office Equipment
194 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
231 Interest Payable
241 Salaries Payable
EQUITY
311 Common Stock
312 Paid-In Capital in Excess of Par-Common Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Treasury Stock
332 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
350 Unrealized Gain (Loss) on Available-for-Sale Investments
351 Cash Dividends
352 Stock Dividends
390 Income Summary
REVENUE
410 Sales
611 Interest Revenue
612 Dividend Revenue
631 Gain on Sale of Investments
641 Unrealized Gain on Trading Investments
EXPENSES
511 Cost of Merchandise Sold
512 Bad Debt Expense
516 Cash Short and Over
520 Salaries Expense
531 Advertising Expense
534 Selling Expenses
535 Rent Expense
537 Office Supplies Expense
562 Depreciation Expense-Office Equipment
590 Miscellaneous Expense
710 Interest Expense
731 Loss on Sale of Investments
741 Unrealized Loss on Trading Investments

Answer 1

Answer:

1) Dr Investments-Medina City Bonds $240,000

Cr Interest Receivable $3,600

Cr Cash $243,600

2) Dr Cash $7,200

Cr Interest Receivable3600

Cr Interest Revenue $3,600

3) Dr Cash $118,200

Dr Loss on sale of investments $2,400

($120,000+$600-$118,200)

Cr Interest Revenue $600

Cr Investments- medina city bonds $120,000

Explanation:

Preparation of the journal entries

1) Dr Investments-Medina City Bonds $240,000

Cr Interest Receivable $3,600

Cr Cash$243,600

($240,000+$3,600)

2) Dr Cash $7,200

($240,000 x 6% x ½ =$7,200)

Cr Interest Receivable $3,600

Cr Interest Revenue $3,600

($7,200+$3,600)

3) Dr Cash $118,200

[ (120,000 x .98)-$600]

Dr Loss on sale of investments $2,400

($120,000+$600-$118,200)

Cr Interest Revenue $600

Cr Investments- medina city bonds $120,000