he following information relates to the debt securities investments of Wildcat C

Question

he following information relates to the debt securities investments of Wildcat Company.

(a)

Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are available-for-sale securities.

1. On February 1, the company purchased 12% bonds of Gibbons Co. having a par value of $381,600 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 8% bonds of Sampson, Inc. were purchased. These bonds with a par value of $266,400 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1. 4. On September 1, bonds with a par value of $72,000, purchased on February 1, are sold at 97 plus accrued interest. 5. On October 1, semiannual interest is received. 6. On December 1, semiannual interest is received. 7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 93 and 91, respectively.

Explanation / Answer

Investment in 8% bonds $23,976

date account title    debit credit February 1 Investment in 12% bonds $381,600 interest receivable $15,264 cash /bank $396,864 April 1 cash $22,896 Interest income $7,632 Interest receivable $15,264 July 1 Investment in 8% bonds $266,400 Interest receivable $1,776 cash/Bank $268,176 September 1 cash $73,440 Investment in 12% bonds $69,840 Interest income($72,000*.12*5/12) $3,600 october 1 Loss on sale of bonds $2,160 Investment in 12% bonds $2,160 october 1 Cash $18,576 Interest income $18,576 December 1 cash $10,656 interest receivable $1,776 Interest income $8,880

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