Gonzalez Company acquired $190,800 of Walker Co., 8% bonds on May 1 at their fac

Question

Gonzalez Company acquired $190,800 of Walker Co., 8% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $51,000 of the bonds for 99.

Journalize entries to record the following in Year 1:

For a compound transaction, if an amount box does not require an entry, leave it blank.

a. The initial acquisition of the bonds on May 1.

b. The semiannual interest received on November 1.

c. The sale of the bonds on November 1.

d. The accrual of $1,864 interest on December 31.

May 1

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit May 1 Bond investment 190800 Cash 190800 (To record bond purchase) Nov 1 Cash (190800*8%*6/12) 7632 Interest revenue 7632 (To record interest) Nov 1 Cash (51000*99/100) 50490 Loss on sale of bond investment 510 Bonds investment 51000 (To record sale of bonds) Dec 31 Interest receivable 1864 Interest revenue 1864 (To record accured interest)

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