Question

Crane Company purchased 85 Rinehart Company 8%, 10-year, $1,980 bonds on January 1, 2020, for $168,300. The bonds pay interest annually on January 1. On January 1, 2021, after receipt of interest, Crane Company sold 55 of the bonds for $92,565. Prepare the journal entries to record the transactions described above. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Answer 1

Answer:

01-Jan-20

Dr Inventment in Bonds $168,300

Cr Cash $168,300

31-Dec-20

Dr Interest receivables $13,464

Cr Interest Revenue $13,464

01-Jan-21

Dr Cash $13,464

Cr Interest receivables $13,464

01-Jan-21

Dr Cash $92,565

Dr Loss on sale of Bonds Investment $16,335

Cr Investment in Bonds $108,900

Explanation:

Preparation of the journal entries to record the transactions

01-Jan-20

Dr Inventment in Bonds $168,300

Cr Cash $168,300

(To record Bonds purchased)

31-Dec-20

Dr Interest receivables $13,464

Cr Interest Revenue [168300 x 8%] $13,464

(To record Interest accrued)

01-Jan-21

Dr Cash $13,464

Cr Interest receivables $13,464

(To record Interest received in cash)

01-Jan-21

Dr Cash $92,565

Dr Loss on sale of Bonds Investment [108900 - 92565] $16,335

Cr Investment in Bonds [55 x $1980] $108,900

(To record Investment sold)