Question

Gonzalez Company acquired $200,000 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 $70,000 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 $1,300 interest on December 31.

Answer 1

S. No.	Date	Accounts titles and explanation	Debit	Credit
(a)	May 1	Investment - Walker Co.	$200,000
		... Cash		$200,000
		(To record the acquisition of bonds)
(b)	November 1	Cash	$6,000
		Interest Revenue ($200,000 * 6% * (6/12)		$6,000
		(To record the interest received)
(c)	November 1	Cash ($70,000 * 97%)	$67,900
		Loss on sale of investment	$2,100
		... Investment - Walker Co.		$70,000
		(To record the sale of bonds)
(d)	December 31	Interest receivable	$1,300
		... Interest revenue		$1,300
		(To record the accural of interest)