AE12-2 Foren Corporation had the following transactions pertaining to debt inves

Question

AE12-2

Foren Corporation had the following transactions pertaining to debt investments.

Jan. 1- Purchased 57 7%, $1,700 Choate Co. bonds for $96,900 cash plus brokerage fees of $865. Interest is payable semiannually on July 1 and January 1.

July 1-Received semiannual interest on Choate Co. bonds.

July 1.-Sold 28 Choate Co. bonds for $51,000 less $590 brokerage fees.

Journalize the transactions.
Jan. 1
July 1.
July 1.

Prepare the adjusting entry for the accrual of interest at December 31.
Dec 31.

Explanation / Answer

Jan-01 7% bonds dr 96900 Brokerage fees dr 865 To cash 97765 Jul-01 Bank dr 3391.5 To interest received 3391.5 Bank a/c dr 50410 Brokerage fees dr 590 To 7% bonds 48450 To loss on sale of bonds 2550 Dec-31 Interest accrued dr 1695.75 To interest received 1695.75

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