Question

On July 25, 2014, Russell Inc. purchases $5,000 of XYZ Co. 7.5% bonds at their faceamount, plus any accrued interest. The bonds pay interest semiannually, payableon June 30 and December 31.

• Prepare the journal entry to record the purchase. Round interestreceivable to the nearest cent, and assume a 360-day year, with 30 days ineach month.
• Prepare the journal entry to record the receipt of interest on December31, 2014, for Pear Inc.  

Answer 1

Journal entries
date	Particulars	Amount	Amount
25-Jul-14	Investment in Bond A/c Dr	$              5,000
	Cash /Bank		$              5,000
	(Purchase of bonds of 7.5% at their face amount )
31-Dec-14	Bank A/c Dr	$                 161
	Interest Receivable from Bond		$                 161
	(Received interest from Bond Semi annually)