Question

Entries for Investments in Bonds, Interest, and Sale of Bonds Kalyagin Investments acquired $221,200 Jerris Corp., 696 bonds at their face amount on October 1, 20Y2. The bonds pay interest on October 1 and April 1. On April 1, 20Y3, Kalyagin sold $86,800 of Jerris bonds at 101 Journalize the entries to record the following: Do not round interim calculations. Round final answers to nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. a. The initial acquisition of the Jerris Corp. bonds on October 1, 20Y2. 20Y2 Oct. 1Y b. The adjusting entry for three months of accrued interest earned on the Jerris Corp. bonds on December 31, 20Y2. 20Y2 Dec. 31 c. The receipt of semiannual interest on April 1, 20Y3 20Y3 Apr. 1

Answer 1

JOURNAL ENTRIES

a) The Initial acquisition of the Jerris corp. bonds on October 1 20Y2.

Investment in Bonds (Debit) $221,200

Cash (Credit) $ 221,200

b) Adjusting entry for three months of accrued interest earned on December 31, 20Y2

Interest receivable (Debit). $ 3,318

Interest Revenue (Credit). $ 3,318

($ 221,200 x 6%x 3/12 = $ 3318)

c) The receipt of semi annual interest on April 01, 20Y3

Cash (Debit) ($221,200x6%x6/12) $ 6,636

Interest receivable (Credit) $ 3,318

Interest revenue ( Credit) $ 3,318

Note; If bond is purchased for premium, the difference between the bond face value and the purchase price shall be amortized over the life of the bond using straight-line method.  

d) The sale of bond on April 01, 20Y3 for $101.

Cash (Debit) $ 87,668

Profit on sale of bond (Credit) $868

Investment in bond(Credit) $86800

(Par Value = 100, 868 bonds sold for 101

Calculation will be 868x100= 86800 & 868x1= 868)