On April 1, 2014, Olopade Co. purchased $160,000 of 6% bonds for $166.300 plus a

Question

On April 1, 2014, Olopade Co. purchased $160,000 of 6% bonds for $166.300 plus accrued interest as an available-for-sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2019 Instructions (a) Prepare the journal entry on April 1, 2014. (b) The bonds are sold on November 1, 2017 at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method (by months and round to the nearest dollar). Prepare all entries required to properly record the sale.

Explanation / Answer

a Debt Investments 166300 Interest Revenue 2400 =160000*6%/12*3           Cash 168700 b Interest Revenue 400 =6300/63*4        Debt Investments 400 Cash 3200 =160000*6%/3      Interest Revenue 3200 Cash 164800 =160000*1.03       Gain on Sale of Investments 400        Debt Investments 164400 =166300-(6300/63*19)

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