80.2K

Verified Solution

Link Copied!

1

Entries for Investment in Bonds, Interest, and Sale of Bonds

Gonzalez Company acquired $192,600 of Walker Co., 8% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $48,600 of the bonds for 96.

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.

a. The initial acquisition of the bonds on May 1.

May 1	Investments-Walker Co. Bonds
	Cash

Feedback

a. Record the investment at par and the cash paid.

b. The semiannual interest received on November 1.

Nov. 1	Cash
	Interest Revenue

Feedback

b. Bond face amount x interest rate x part of a year = interest revenue (credit) and Cash (debit).

c. The sale of the bonds on November 1.

Nov. 1	Cash
	Loss on Sale of Investments
	Investments-Walker Co. Bonds

Feedback

c. Calculate the proceeds: 96% x face amount of bonds. Debit Cash for this amount. Credit Investment for the face amount of the bonds. Complete the entry by recording any gain or loss as the difference between the sale amount and the face amount.

d. The accrual of $1,920 interest on December 31.

Dec. 31	Interest Receivable
	Interest Revenue

Answer & Explanation Solved by verified expert

See Answer