Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Chapter 15, Problem 15.3EX
To determine
Bond investment: Bond investments are debt securities which pay a fixed interest revenue to the investor.
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 Corporation B
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Entries for Investment in Bonds, Interest, and Sale of Bonds
Bocelli Co. purchased $84,000 of 7%, 12-year Sanz County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Bocelli Co. sold $30,000 of the Sanz County bonds at 102 plus $175 accrued interest less a $665 brokerage commission.
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. Assume a 360-day year.
a. Provide the journal entry for the purchase of the bonds on May 11 plus 72 days of accrued interest.
Year 1 May 11
fill in the blank 2f0f5d043fb3074_2
fill in the blank 2f0f5d043fb3074_3
fill in the blank 2f0f5d043fb3074_5
fill in the blank 2f0f5d043fb3074_6
fill in the blank 2f0f5d043fb3074_8
fill in the blank 2f0f5d043fb3074_9
b. Provide the journal entry…
Entries for Investment in Bonds, Interest, and Sale of Bonds Bocelli Co. purchased $87,000 of 7%, 12-year Sanz County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Bocelli Co. sold $36,000 of the Sanz County bonds at 101 plus $210 accrued interest less a $405 brokerage commission. 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. Assume a 360-day year.
Entries for bond (held-to-maturity) investments
Gillooly Co. purchased $24,000 of 8%, 12-year Lumpkin County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Gillooly Co. sold $6,000 of
the Lumpkin County bonds at 102 plus $40 accrued interest less a $135 brokerage commission.
Journalize the entries to record the following: Do not round interim calculations. Round final answers to nearest dollar. If an amount box does not require an entry, leave it blank. Assume a 360-day year.
a. The purchase of the bonds on May 11 plus 40 days of accrued interest.
Year 1 May 11 Investments-Lumpkin Cour✓ ✓
Interest Receiv; ✔
Cash
Feedback
►Check My Work
b. Semiannual interest on October 1.
Year 1 Oct. 1 Cash
Interest Receiva ✓
Interest Rever✓ ✓
Feedback
►Check My Work
c. Sale of the bonds on October 31.
Year 1 Oct. 31 Cash✓
960
88
Loss on Sale of Invest
Interest Rever ✓…
Chapter 15 Solutions
Accounting
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQCh. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQCh. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ
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