Question

Torres Investments acquired $233,600 of Murphy Corp., 4% bonds at their face amount on October 1, Year 1. The bonds pay interest on October 1 and April 1. On April 1, Year 2, Torres sold $105,200 of Murphy Corp. bonds at 101. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles): a. The initial acquisition of the Murphy Corp. bonds on October 1, Year 1. b. The adjusting entry for three months of accrued interest earned on the Murphy Corp. bonds on December 31, Year 1. c. The receipt of semiannual interest on April 1, Year 2. d. The sale of $105,200 of Murphy Corp. bonds on April 1, Year 2, at 101.

Answer 1

Journal entry :

Date	account & explanation	debit	credit
Oct 1	Bonds investment	233600
	Cash		233600
	(To record bonds investment)
Dec 31	Interest receivable (233600*4%*3/12)	2336
	Interest revenue		2336
	(To record accured interest)
Apr 1	Cash	4672
	Interest receivable		2336
	Interest revenue		2336
	(To record receipt of interest)

2) Journal entry :

Date	account & explanation	debit	credit
Apr 1	Cash (105200*1.01)	106252
	Gain on sale of bond investment		1052
	Bonds investment		105200
	(To record sale of bond investment)