Brief Exercise 17-4 Hendricks Corporation purchased trading investment bonds for

Question

Brief Exercise 17-4

Hendricks Corporation purchased trading investment bonds for $52,780 at par. At December 31, Hendricks received annual interest of $2,860, and the fair value of the bonds was $50,050.

Prepare Hendricks’ journal entries for (a) the purchase of the investment, (b) the interest received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (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 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

(c)

No.

Account Titles and Explanation

Debit

Credit

(a)

(b)

(c)

Explanation / Answer

NUMBER ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT a) INVESTMENT BONDS DR. 52780 TO CASH 52780 (BEING INVESTMENT MADE IN BONDS) b) CASH DR. 2860 TO INTEREST RECEIVED 2860 (BEING INTEREST RECEIVED ON BONDS) c) LOSS ON BONDS DR. 2730 TO BONDS (52780 -50050) 2730 (BEING ADGUSTING ENTRY FOR LOSS PASSED)

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