On April 1, 2014, Olopade Co. purchased $160,000 of 6% bonds for $166,300 plus a
ID: 2595029 • Letter: O
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
DATE
DETAILS
AMOUNT $
DEBIT A/C
CREDIT A/C
2014
APR 1
PURCHASE OF BOND INCLUSIVE OF ACCRUED INTEREST ( 3 MONTHS) AND PREMIUM
160000
6% BONDS
3900
PREMIUM
ON BOND
2400
INTEREST RECEIVABLE
166,300
CASH
2017
NOV 1
SALE OF BOND, INCLUSIVE AT 103 AND INTEREST FOR 4 MONTHS FROM 1/7/2017
168000
CASH
160000
6% BONDS
4800
3% PREMIUM
3200
INTEREST INCOME
DATE
DETAILS
AMOUNT $
DEBIT A/C
CREDIT A/C
2014
APR 1
PURCHASE OF BOND INCLUSIVE OF ACCRUED INTEREST ( 3 MONTHS) AND PREMIUM
160000
6% BONDS
3900
PREMIUM
ON BOND
2400
INTEREST RECEIVABLE
166,300
CASH
2017
NOV 1
SALE OF BOND, INCLUSIVE AT 103 AND INTEREST FOR 4 MONTHS FROM 1/7/2017
168000
CASH
160000
6% BONDS
4800
3% PREMIUM
3200
INTEREST INCOME
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