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The following bond investment transactions were completed during 2012 by Mission

ID: 2370866 • Letter: T

Question

The following bond investment transactions were completed during 2012 by Mission Company:


Jan. 21 Purchased 50, $1,000 par value government bonds at 100 plus 20 days' accrued interest. The bonds pay 4.5% annual interest on June 30 and January 1.



June 30 Received semiannual interest on bond investment.

Sept. 5 Sold 24, $1,000 par value bonds at 97 plus $201 accrued interest.

a. Journalize the entries for these transactions.

Assume a 360-day year. 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.

Explanation / Answer

a. Journalize the entries for these transactions.


Jan. 21 Purchased 50, $1,000 par value government bonds at 100 plus 20 days' accrued interest. The bonds pay 4.5% annual interest on June 30 and January 1.


Investment in Govt Bond A/c Dr 50,000

Accrued Interest A/c Dr 125

To Bank A/c 50,125

(Being Bond Purchased)


June 30 Received semiannual interest on bond investment.


Bank A/c Dr 1125

To Accrued Interest 1125

  

(being accrued interest on bond recieved)


Sept. 5 Sold 24, $1,000 par value bonds at 97 plus $201 accrued interest.


Bank A/c Dr 2529

P&L A/c (Loss on investment sold) Dr 72

To Investment in Govt Bond A/c 2400

To Accrued Interest    201

(Being bond sold recognised)

     

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