Debt Investment Transactions, Available-for-Sale Valuation Dollar Mart Inc. is a

Question

Debt Investment Transactions, Available-for-Sale Valuation

Dollar Mart Inc. is a general merchandise retail company that began operations on January 1, 2014. The following transactions relate to debt investments acquired by Dollar Mart Inc., which has a fiscal year ending on December 31:

Required:

Journalize the entries to record these transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

2014 May 1 Purchased $54,000 of Elkin City 7%, 10-year bonds at their face amount plus accrued interest of $630. The bonds pay interest semiannually on March 1 and September 1. June 16 Purchased $98,000 of Morgan Co. 6%, 12-year bonds at their face amount plus accrued interest of $245. The bonds pay interest semiannually on June 1 and December 1. Sep. 1 Received semiannual interest on the Elkin City bonds. Oct. 1 Sold $21,600 of Elkin City bonds at 103 plus accrued interest of $126. Dec. 1 Received semiannual interest on Morgan Co. bonds. Dec. 31 Accrued $756 interest on Elkin City bonds. Dec. 31 Accrued $490 interest on Morgan Co. bonds. 2015 Mar. 1 Received semiannual interest on the Elkin City bonds. June 1 Received semiannual interest on the Morgan Co. bonds.

Explanation / Answer

journal Entries Date Accounts/ Explanation Debit Credit 2014 Apr. 1 Investment - Elkin city 7% Bonds $        54,000 Interest Receivables $              630 Cash $        54630 (Being Bonds Purchased ) May. 16 Investment -Morgan co.6% Bonds $        98,000 Interest Receivables $                245 Cash $        98245 (Being Bonds Purchased ) Aug. 1 Cash (54000*7%*6/12) $          1890 Interest Revenue (54000*6%*6/12) $          1620 Interest Receivables $              270 (Being interets on Smoke Bonds received) Sept. 1 Cash (21600*103% + 126) $      22374 gain on sales on investment $              756 Interest revenue $              490 Investment - Smoke Bay 6% Bonds $        21128 (Being $12000 Value Smoke bonds sold for 101%) Interest Receivables Dec. 31 Interest Revenue $          756 (Being interest accrued on elkin bonds) $          756 Interest Receivables Dec. 31 Interest Revenue $              490 (Being interest accrued on morganbonds) $              490

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