Glaser Company had the following transactions pertaining to debt securities held as a short-term investment.
Jan. 1 Purchased 60, 8%, $1,000 Dexter Company bonds for $60,000 cash plus brokerage fees of $800. Interest is payable semiannually on July 1 and
January 1. July 1 Received semiannual interest on Dexter Company bonds.
Oct. 1 Sold 30 Dexter Company bonds for $32,000 plus accrued interest less $500 brokerage fees.
Instructions
(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest on December 31.
a) Journal entry
Date | account and explanation | Debit | Credit |
Jan 1 | Investment in Bonds (60000+800) | 60800 | |
Cash | 60800 | ||
(To record investment) | |||
July 1 | Cash (60000*8%*6/12) | 2400 | |
Interest revenue | 2400 | ||
(To record interest) | |||
Oct 1 | Cash (32000+600-500) | 32100 | |
Investment in bonds (608000/60*30) | 30400 | ||
Interest revenue (30000*8%*3/12) | 600 | ||
gain on sale of investment | 1100 | ||
(To record sale of investment) | |||
b) Adjusting entry
date | account and explanation | Debit | Credit |
Dec 31 | Interest receivable (30000*8%*3/12) | 600 | |
Interest revenue | 600 | ||
(To record interest) |
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