Question

Bond Investment Transactions

Journalize the entries to record the following selected bond investment transactions for Starks Products:

If an amount box does not require an entry, leave it blank.

a. Purchased for cash $120,000 of Iceline, Inc. 6% bonds at 100 plus accrued interest of $1,200.

b. Received first semiannual interest payment.Feedback

c. Sold $80,000 of the bonds at 103 plus accrued interest of $910.Feedback

Answer 1

Journal Entries
Date	Account Title and explanation	Debit	Credit
a)	Investment in Bond	$                  1,20,000
	Interest Receivable	$                        1,200
	To Cash		$                 1,21,200
	Cash ($120,000 X 3% (6% X 6 months /12 months)	$                        3,600
b)	To Interest Receivable		$                       1,200
	To Interest Revenue		$                       2,400
c)	Cash	$                      83,310
	To Investment in Bonds		$                    80,000
	To Gain on sale of investment in bonds ($ 82,400 0 $ 80,000)		$                       2,400
	To Interest Revenue		$                          910
	Working :
	Sale Value of Bonds = $ 80,000 X 103% =	$                      82,400
	accrued interest	$                            910
	Total Cash Value of Sales	$                      83,310