Entries for investment in bonds, interest and sale of bondsThe following bond investment transactions were completed during arecent year by Starks Company: a. Journalize the entries for these transactions.b. Provide the December 31, Year 1, adjusting journal entry forsemiannual interest earned on the bonds. Year1Purchased 75, $1,000 government bonds at 100 plus accruedinterest of $375 (one month). The bonds pay 6% annual interestJan.31.on July 1 and January 1.JulyReceived semiannual interest on bond investment.1.30. Sold 35, $1,000 bonds at 98 plus $350 accrued interest (twoAug.months).

Journal entry is the primary entry that records the financial transactions initially.

Year 1 Purchased 75, $1,000 government bonds at 100 plus accrued interest of $375 (one month). The bonds pay 6% annual interest Jan. 31. on July 1 and January 1. July Received semiannual interest on bond investment. 1. 30. Sold 35, $1,000 bonds at 98 plus $350 accrued interest (two Aug. months).

Year 1 Purchased 75, $1,000 government bonds at 100 plus accrued interest of $375 (one month). The bonds pay 6% annual interest Jan. 31. on July 1 and January 1. July Received semiannual interest on bond investment. 1. 30. Sold 35, $1,000 bonds at 98 plus $350 accrued interest (two Aug. months).

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5MC: On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000...

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Question

Entries for investment in bonds, interest and sale of bonds
The following bond investment transactions were completed during a
recent year by Starks Company:

a. Journalize the entries for these transactions.
b. Provide the December 31, Year 1, adjusting journal entry for
semiannual interest earned on the bonds.

Year
1
Purchased 75, $1,000 government bonds at 100 plus accrued
interest of $375 (one month). The bonds pay 6% annual interest
Jan.
31.
on July 1 and January 1.
July
Received semiannual interest on bond investment.
1.
30. Sold 35, $1,000 bonds at 98 plus $350 accrued interest (two
Aug.
months).

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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