Swartz Inc. enters into the following transactions during 2010: July 1: e on the

Question

Swartz Inc. enters into the following transactions during 2010:

July 1: e on the open market $10,000 face value of Gallatin bonds. The bonds have a stated annual interest rate of 6% with interest paid semiannually on June 30 and December 31. The bonds mature in 5½ years.

Oct. 23: Purchased 600 shares of Eagle Rock common stock at $20 per share.

Nov. 21: Purchased 200 shares of Montana preferred stock at $30 per share.

Dec. 10: e on the Eagle Rock stock and $2.00 per share on the Montana stock.

Dec. 28: Sold 400 shares of Eagle Rock common stock at $25 per share.

Dec. 31: Received interest from the Gallatin bonds.

Required Prepare all necessary journal entries on Swartz’s records to account for its investments during 2010.

Explanation / Answer

Note : Details on Eagle Rock stock for Dec 10 are not clear hence ignored . Jul 1 Investment in Bond Acct Dr 10000 Cash Cr 10000 Buye on the open market $10,000 face value of Gallatin bonds. Oct. 23 Securities Acct Dr 12000 Cash Cr 12000 Purchased 600 shares of Eagle Rock common stock at $20 per share. Nov. 21 Securities Acct Dr 6000 Cash Cr 6000 Purchased 200 shares of Montana preferred stock at $30 per share. Dec. 10 Cash Dr 400 DIvidend Income Cr 400 e on the Eagle Rock stock and $2.00 per share on the Montana stock. Dec. 28: Cash Dr 10000 Securities Acct Cr 10000 Sold 400 shares of Eagle Rock common stock at $25 per share. Dec. 31: Cash Dr 300 Interest Income Cr 300 Received interest from the Gallatin bonds ($10000*6%/2 = 300

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