Fleet Inc. is an athletic footware company that began operations on January 1, 2

Question

Fleet Inc. is an athletic footware company that began operations on January 1, 2012. The following transactions relate to debt investments acquired by fleet Inc which has a fiscal year ending december 31.

2012
Mar. 1 Purchased $36,000 of Madison Co. 5% 10-year bonds at face value plus plus accrued interest of $150. The binds pay interest semiannually on Feb 1 and Aug 1

Apr 16 Purchased $45,000 of Westville 4%, 15- year bonds at face value plus accrued interest of $75. The bonds pay interest semiannnualy on Apr 1 & Oct 1

Aug 1 Received semiannual interest on the Madison Co. bonds

Sept 1 Sold $12,000 of Madison Co, bonds at 98 plus accrued interest of $50.

Oct 1 Received semiannual interest on Westville Bonds.

Dec 31. accrued $500 interest on Madison Co. bonds

31. accrued $450 interest on Westville bonds


2013
Feb 1 Received semiannual interest on the Madison Co bonds

Apr 1 Received semiannual interest on the Westville bonds


Instructions
1. Journalize the entries to record these transactions
2. if the bond portfolio was classified as available for sale, what impact would this have on financial statement disclosure?

Explanation / Answer

2012

Mar. 1 Purchased $36,000 of Madison Co. 5%, 10-year bonds at face value plus accrued interest of $150. The bonds pay interest semiannually on February 1 and August 1.
Investments DEBIT 36000
Interest receivable DEBIT 150
Cash CREDIT 36150

Apr. 16 Purchased $45,000 of Westville 4%, 15-year bonds at face value plus accrued interest of $75. The bonds pay ibnterest semiannually on April 1 and October 1.
Investment DEBIT 45000
Interest receivable DEBIT 75
Cash CREDIT 45075

Aug. 1. Received semiannual interest on the Madison Co. bonds.
Cash DEBIT 900 (36000*.05/2)
Interest revenue CREDIT 750
Interest receivable CREDIT 150

Sept. 1. Sold $12,000 of Madison Co. bonds at 98 plus accrued interest of $50.
Cash DEBIT 11810 (12000*.98 +50)
Loss on sale of investment DEBIT 240
Investments CREDIT 12000
Interest revenue CREDIT 50

Oct. 1. Received semiannual interest on Westville bonds.
Cash DEBIT 900 (45000*.04/2)
Interest revenue CREDIT 825
Interest receivable CREDIT 75

Dec. 1. Accrued $500 interest on Madison Co. bonds.
Interest receivable DEBIT 500
Intereset revenue CREDIT 500

Dec. 31. Accrued $450 interest on Westville bond.
Interest receivable DEBIT 450
Intereset revenue CREDIT 450

2013

Feb. 1. Received semiannual interest on the Madison Co. bonds.
Cash DEBIT 600 ((36000-12000)*.05/2)
Interest receivable CREDIT 500
Interest revenue CREDIT 100

Apr. 1. Received semiannual interest on the westville bonds.
Cash DEBIT 900
Interest receivable CREDIT 450
Interest revenue CREDIT 450

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