Question

Torres Corporation had the following transactions pertaining to debt investment:
Jan. 1, 2014			Purchased 120 Abongwa Co. 11%, $1,000 bonds for $120,000 cash. Interest is payable
			$110,000 annually on January 1.
Dec. 31, 2014			Accrued interest on Abongwa Co. bonds.
Jan. 1, 2015			Received interest on Abongwa Co. bonds.
July 1, 2015			Sold 30 Abongwa Co. bonds for $35,000 cash.
Instructions: Journalize the transactions.
				GENERAL JOURNAL
DATE						LP		Debit		Credit

Answer 1

Date	General Journal	Debit	Credit
1-Jan-14	Bonds Receivables -11%	$        120,000
	Cash		$        120,000
	(For bonds purchased of Abongwa Co for 120000 cash)
31-Dec-14	Interest Receivable	$          12,000
	Interest Income		$          12,000
	(For interest accrued at 11% of 120000 on Abongwa Co bond)
1-Jan-15	Cash	$          12,000
	Interest Receivable		$          12,000
	(For cash received of accrued interest of Bonds)
1-Jul-15	Cash	$          35,000
	Gain on sale of bonds		$            5,000
	Bonds Receivables -11%		$          30,000
	(For sale of bonds for 35000 cash of 30 bonds)
Note: Bonds purchase = 120000/120 = 1000 per bond
Gain on sale of bond = 35000-(30*1000) = 5000