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Bond investment transactions Journalize the entries to record the following selected bond investment transactions for Mall Trust: a. Purchased for cash $300,000 of Oates -City 4% bonds at 1(M) plus accrued interest of $5,000. b. Received first semiannual interest payment. c. Sold $150,000 of the bonds at 97 plus accrued interest of $500.

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 13, Problem 1APE
Textbook Problem
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Bond investment transactions

Journalize the entries to record the following selected bond investment transactions for Mall Trust:

  • a. Purchased for cash $300,000 of Oates -City 4% bonds at 1(M) plus accrued interest of $5,000.
  • b. Received first semiannual interest payment.
  • c. Sold $150,000 of the bonds at 97 plus accrued interest of $500.

(a)

To determine

Bond investment:

Bond investments are debt securities which pay fixed interest revenue to the investor.

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The bond investment transactions of H Trust.

Explanation of Solution

Prepare journal entry for purchase of $300,000 bonds of O City at 100% with an accrued interest of $3,000.

Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($)
    Investments–O City   300,000  
    Interest Receivable   3,000  
    �...

(b)

To determine

To Prepare: The journal entry to record the interest revenue received.

(c)

To determine

To Prepare: The journal entry.

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Chapter 13 Solutions

Financial & Managerial Accounting
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