Question

1. Entries for The balance sheet caption used to report temporary or long-term investments in stocks or bonds held as either trading, available-for-sale, held-to-maturity, or equity method securities.Investment in Bonds, Interest, and Sale of Bonds

   Gonzalez Company acquired $201,600 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $55,800 of the bonds for 98.

   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	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable
   	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable

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   b. The semiannual interest received on November 1.

   Nov. 1	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable
   	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable

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   c. The sale of the bonds on November 1.

   Nov. 1	Cash Gain on Sale of Investments Interest Receivable Interest Revenue Investments-Walker Co. Bonds
   	Gain on Sale of Investments Interest Receivable Interest Revenue Loss on Sale of Investments Notes Receivable
   	Cash Gain on Sale of Investments Interest Receivable Investments-Walker Co. Bonds Notes Receivable

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   d. The accrual of $1,458 interest on December 31.

   Dec. 31	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable
   	Cash Interest Receivable Interest Revenue Investments-Walker Co. Bonds Notes Receivable

Answer 1

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

Investments-Walker Co. Bonds ....Dr $201,600

To Cash A/c $201,600

b. The semiannual interest received on November 1.

Cash A/c ....Dr $6,048

To interest Revenue A/c $6,048

Calculations: 201600*6%*6/12 = $6048

c. The sale of the bonds on November 1.

Cash A/c ....Dr $54,684

Loss on sale of investment A/c ....Dr $1,116

To Investments-Walker Co. Bonds $55,800

Calculations: Cash $55800*98%= $54,684

Loss on sale = 55800-54684=$1116

d.The accrual of $1,458 interest on December 31.

Interest Receivable A/c ....Dr $1,458

To Interest Revenue A/c $1,458