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27. On January 1, 2019, Parsons Company purchased $84,000, 10 year, 7% government bonds at 100. The semi-annual interest paym
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Answer #1

Journal Entries

1) On puchase of Bonds

On 1 January 2019 Debit Credit

7% Government Bonds $ 840,000

Cash $ 840,000

2) on 30 June 2019

Interest for 6 Months = $ 840,000*7%*6/12

= $ 29,400

Debit Credit

Cash $ 29,400

Interest Income $ 29,400

On 30 December

Interest for 6 months from 1 july to 31 December = $ 840,000*7%*6/12

= $29,400

Debit Credit

Cash $ 29,400

Interest Income $ 29,400

3) on 1st February 2020 for sale of Bonds

Cash received on sale of bonds = $ 82,000

Interest for the month of january = $ 840,000*7%*1/12

= $ 4900

Total Cash Received = $ 82,000+ $ 4900 = $ 86,900

Debit Credit

Cash $ 86,900

Loss on sale of Bonds $ 2000

7% Government Bonds $84,000

Interest On Bonds $ 4900

Note : Cost of Bonds = $84,000 and the Sale of Bonds = $82,000 A loss of $2000 occured during the Sale of Bonds

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