Question

Parilo Company acquired $183,600 of Makofske Co., 4% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold $43,800 of the bonds for 97.

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

May	1	Initial acquisition of the bonds
Nov.	1	Semiannual interest received
	1	Sale of the bonds
Dec.	31	Accrual of $932 interest

Answer 1

Journal entries :

Date	account and explanation	debit	credit
May 1	Bond investment	183600
	Cash		183600
	(To record initial investment)
Nov 1	Cash (183600*4%*6/12)	3672
	Interest revenue		3672
	(To record semiannual interest)
Nov 1	Cash (43800*.97)	42486
	Loss on sale of investment	1314
	Bond investment		43800
	(To record sale of investment)
Dec 31	Cash (139800*4%*2/12)	932
	Interest revenue		932
	(To record interest revenue)