Foren Corporation had the following transactions pertaining to debt investments.

Question

Foren Corporation had the following transactions pertaining to debt investments. Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of S900. Interest ispayable semiannually on July 1 and January 1. July 1 Received semiannual interest on Choate Co. bonds. July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees. Journalize the transactions. (For multiple debot/credit entries, list amounts from largest to smallest e. g. 10, 5, 3,2. ) Prepare the adjusting entry for the accrual of interest at December 31.

Explanation / Answer

Jan. 1
Dr Debt investments $50,900
Cr Cash $50,900

July 1
Dr Cash $2,000
Cr Interest revenue $2,000

July 1
Dr Cash $33,500
Cr Debt investments $30,540
Cr Gain on sale of debt investments $2,960

Prepare the adjusting entry for the accrual of interest at December 31.
Dec. 31
Dr Interest receivable $2,000
Cr Interest revenue $2,000

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