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37) On January 1, Carla Vista Company purchased as an investment a $5000, 4% bond for...

37) On January 1, Carla Vista Company purchased as an investment a $5000, 4% bond for $5000. The bond pays interest on January 1. The bond is sold on July 1 for $5500 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?

a

Cash 5600
      Debt Investments 5500
      Interest Revenue 100

b

Cash 5600
      Debt Investments 5000
      Gain on Sale of Debt Investments 500
      Interest Revenue 100

c

Cash 5600
      Debt Investments 5000
      Interest Revenue 600

d

Cash 5500
      Debt Investments 5500
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Answer #1

Interest = $5000 X 4% X 6/12 = $100

Gain on sale = $5500 - $5000 = $500

Journal entry will be passed by debiting cash for $5600 and crediting debt investments with $5000 and gain on sale of debt investments with $500 and interest revenue with $100.

Option b.

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