Homework Answers
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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