Chapter 13, Problem 1EX

a)

To determine

Bond investment:

Bond investments are debt securities which pay fixed interest revenue to the investor.

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The bond investment transactions in the books of Company P.

(b)

To determine

Prepare journal entry to record the semiannual interest revenue received.

(c)

To determine

Prepare journal entry for $50,000 bonds of Company M sold at 96%.

(d)

To determine

Prepare journal entry for accrued interest.