Chapter D, Problem D.4EX

(a)

To determine

Bond investment: Bond investments are debt securities which pay a 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 transaction for purchase of $200,000, 5% bonds of Company M at face value on May 1

(b)

To determine

To journalize: The bond investment transaction to record the semiannual interest revenue received on November 1

(c)

To determine

To journalize: The bond investment transaction $80,000 bonds of Company M sold at 98%, on November 1

(d)

To determine

To journalize: The bond investment transaction for accrued interest of $1,000 on December 31