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Entries for Investment in Bonds, Interest, and Sale of Bonds Gonzalez Company acquired $198,600 of Walker...

Entries for Investment in Bonds, Interest, and Sale of Bonds

Gonzalez Company acquired $198,600 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 $55,800 of the bonds for 97.

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.

b. The semiannual interest received on November 1.

c. The sale of the bonds on November 1.

d. The accrual of $1,666 interest on December 31.

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Answer #1

Journal entry :

Date accounts & explanation debit credit
May 1 Bond investment 198600
Cash 198600
(To record bond purchase)
Nov 1 Cash (198600*7*6/12) 6951
Interest revenue 6951
(To record interest)
Nov 1 Cash (55800*99/100) 55242
Loss on sale of bond investment 558
Bonds investment 55800
(To record sale of bonds)
Dec 31 Interest receivable 1666
Interest revenue 1666
(To record accured interest)
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