Journalize the entries to record the following selected bond investment transact

Question

Journalize the entries to record the following selected bond investment transactions for Southwest Bank:

1. Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500.

2. Received the first semiannual interest.

3. Sold $250,000 of the bonds at 97, plus accrued interest of $1,800.

1. Purchased $400,000 of Daytona Beach 5% bonds at 100 plus accrued interest of $4,500.

2. Received the first semiannual interest.

3. Sold $250,000 of the bonds at 97, plus accrued interest of $1,800.

Explanation / Answer

Answer:

Journal Entries

S.No.

Accounts/ Explanation

Debit

Credit

1

Investment - Daytona 5% Bonds

$ 400,000

Interest Receivables

$      4,500

Cash

$ 404,500

(Being Bonds Purchased )

2

Cash (400000*5%*6/12)

$    10,000

Interest Revenue (10000-4500)

$      5,500

Interest Receivables

$      4,500

(Being interest on Bonds received)

3

Cash (250000*97%% + 1800)

$ 244,300

Loss on Sale on investment (250000*3%)

$      7,500

Interest revenue

$      1,800

Investment - Daytona 5% Bonds

$ 250,000

(Being $250000 Value bonds sold for 97%)

Journal Entries

S.No.

Accounts/ Explanation

Debit

Credit

1

Investment - Daytona 5% Bonds

$ 400,000

Interest Receivables

$      4,500

Cash

$ 404,500

(Being Bonds Purchased )

2

Cash (400000*5%*6/12)

$    10,000

Interest Revenue (10000-4500)

$      5,500

Interest Receivables

$      4,500

(Being interest on Bonds received)

3

Cash (250000*97%% + 1800)

$ 244,300

Loss on Sale on investment (250000*3%)

$      7,500

Interest revenue

$      1,800

Investment - Daytona 5% Bonds

$ 250,000

(Being $250000 Value bonds sold for 97%)

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