On August 1, Year 1, Ant Company sold Bee Company $1,500,000 of 10-year, 6% bond
ID: 2578367 • Letter: O
Question
On August 1, Year 1, Ant Company sold Bee Company $1,500,000 of 10-year, 6% bonds, dated July 1 at 100 plus accrued interest. On March 1, Year 2, Bee sold half of the bonds for $782,500 plus accrued interest.
The sale of the bonds on March 1, Year 2.
CHART OF ACCOUNTSAnt CompanyGeneral Ledger
Required: Present entries to record the following transactions: Bee Company: (a) Purchase of bonds on August 1, Year 1. (b) Receipt of first semiannual interest amount on December 31, Year 1. (c)The sale of the bonds on March 1, Year 2.
CHART OF ACCOUNTSAnt CompanyGeneral Ledger
ASSETS 110 Cash 120 Accounts Receivable 121 Allowance for Doubtful Accounts 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 151 Supplies 152 Prepaid Insurance 161 Investments-Ant Company Bonds 165 Valuation Allowance for Trading Investments 166 Valuation Allowance for Available-for-Sale Investments 181 Land 191 Equipment 192 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 231 Interest Payable 241 Salaries Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Treasury Stock 332 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Unrealized Gain (Loss) on Available-for-Sale Investments 353 Stock Dividends 390 Income Summary REVENUE 410 Sales 611 Interest Revenue 612 Dividend Revenue 631 Gain on Sale of Investments 641 Unrealized Gain on Trading Investments EXPENSES 511 Cost of Merchandise Sold 512 Bad Debt Expense 522 Salaries Expense 531 Advertising Expense 532 Rent Expense 533 Insurance Expense 534 Supplies Expense 561 Depreciation Expense-Equipment 590 Miscellaneous Expense 710 Interest Expense 731 Loss on Sale of Investments 741 Unrealized Loss on Trading InvestmentsExplanation / Answer
Date Ref Accounts Title Dr Cr 1-Aug 161 Investments-Ant Company Bonds $1,500,000 132 Interest Receivable (1500000*6%*1/12) $7,500 110 Cash $1,507,500 b) 110 Cash $45,000 132 Interest receivable $7,500 611 Interest revenue (1500000*6%*5/12) 37500 c) 110 Cash 782500 631 Gain on Sale of Investments $17,500 Interest revenue (1500000*6%*2/12) 15000 161 Investments-Ant Company Bonds $750,000
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