The following information relates to the debt securities investments of Sunland Company. 1. On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $324,000 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of $186,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1. 4. On September 1, bonds with a par value of $60,000, purchased on February 1, are sold at 99 plus accrued interest. 5. On October 1, semiannual interest is received. 6. On December 1, semiannual interest is received. 7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively. (a) Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are available-for-sale securities. (Note to instructor: Some students may debit Interest Receivable at date of purchase instead of Interest Revenue. This procedure is correct, assuming that when the cash is received for the interest, an appropriate credit to Interest Receivable is recorded.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following information relates to the debt securities investments of Sunland Company.

1.		On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $324,000 at 100 plus accrued interest. Interest is payable April 1 and October 1.
2.		On April 1, semiannual interest is received.
3.		On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of $186,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1.
4.		On September 1, bonds with a par value of $60,000, purchased on February 1, are sold at 99 plus accrued interest.
5.		On October 1, semiannual interest is received.
6.		On December 1, semiannual interest is received.
7.		On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively.

(a)

Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are available-for-sale securities. (Note to instructor: Some students may debit Interest Receivable at date of purchase instead of Interest Revenue. This procedure is correct, assuming that when the cash is received for the interest, an appropriate credit to Interest Receivable is recorded.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

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