On January 1, 2013, Dagwood Company purchased at par 11% bonds having a maturity

Question

On January 1, 2013, Dagwood Company purchased at par 11% bonds having a maturity value of S309,500. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category. Prepare the journal entry at the date of the bond purchase. Prepare the journal entry to record the interest received for 2013. Prepare the journal entry to record the interest received for 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)

Explanation / Answer

Date Title Debit credit jan 1 2013 Bond receivable 309,500 cash 309,500 [being bond purchased recorded] dec 31 2013 cash 34045 Interest revenue 34045 [being interest received 309500*.11] dc 31 2014 cash 34045 Interest revenue 34045 [being interest received 309500*.11

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