Question

Gonzalez Company acquired $204,000 of Walker Co., 7% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $57,600 of the bonds for 97.

Journalize entries to record the following in Year 1 (refer to the Chart of Accounts for exact wording of account titles):

a.	The initial acquisition of the bonds on May 1.
b.	The semiannual interest received on November 1.
c.	The sale of the bonds on November 1.
d.	The accrual of $1,708 interest on December 31.

Journalize entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8		Adjusting Entries
9
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Answer 1

	Date	Account title and Explanation	Debit	Credit
a	May 1	Bonds receivable	$204,000
		Cash		$204,000
		[To record acquisition of bonds]
b	Nov 1	Cash	$7,140
		Interest revenue [$204,000 x 3.5%]		$7,140
		[To record interest received]
c	Nov 1	Cash [$57,600 x 0.97]	$55,872
		Loss on sale of bonds	$1,728
		Bonds receivable		$57,600
		[To record sale of bonds]
Adjusting Entries:
d	Dec 31	Interest receivable	$1,708
		Interest revenue		$1,708
		[To record accrued interest revenue]