Question

On November 1, 2017, Reid Corporation acquired bonds with a face value of $500,000 for $481,156.15. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on April 30 and October 31, were purchased to be held to maturity, and are due October 31, 2021. On November 1, 2018, in contemplation of a major acquisition, the bonds were sold for $500,000. Reid is on a fiscal year accounting period ending October 31 and uses the effective interest method.

Required:

Prepare journal entries to record the purchase of the bonds, the interest receipts on April 30, 2018, and October 31, 2018, and the sale of the bonds.

CHART OF ACCOUNTS
Reid Corporation
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 137 Interest Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation 191 Investment in Held-to-Maturity Debt Securities LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 431 Interest Income 434 Gain on Sale of Debt Securities EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 599 Loss on Sale of Debt Securities 910 Income Tax Expense

Prepare journal entries to record the purchase of the bonds, the interest receipts on April 30, 2018, and October 31, 2018, and the sale of the bonds. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11

Answer 1