The following bond investment transactions were completed during 2016 by Starks

Question

The following bond investment transactions were completed during 2016 by Starks Company:

Required:

Chart of Accounts

Journal

Journalize the entries for the transactions. Refer to the Chart of Accounts for exact wording of account titles. Assume a 360-day year.

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JOURNAL

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Adjusting Entries

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Jan. 31 Purchased 69, $1,000 government bonds at 100 plus 30 days’ accrued interest. The bonds pay 7% annual interest on July 1 and January 1. July 1 Received semiannual interest on bond investment. Aug. 29 Sold 48, $1,000 bonds at 96 plus $560 accrued interest.

Explanation / Answer

No. Date Account Titels and Explanation Debit Credit a. Jan. 31, 2016 Investment in Bonds $69,000 Interest receivable ($69,000 x 7% x 30/360) $402.50   Cash $69402.50 July 1, 2016 Cash ($69,000 x 7% x 180/360) $2,415   Interest receivable $402.50   Interest Income $2012.50 Aug.29,2016 Cash $46,640 Loss on sale of investments ($48,000/100 x 4) $1,920   Investments $48,000   Interest income $560 b. Dec. 31, 2016 Interest receivable ($21,000 x 7% x 180/360) $735   interest income $735

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