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Journalize the entries to record the following selected bond investment transactions for Starks Products: a. Purchased for cash $120,000 of Iceline, Inc. 5% bonds at 100 plus accrued interest of $1,000. b. Received first semiannual interest payment. c. Sold $60,000 of the bonds at 101 plus accrued interest of $500.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 15, Problem 1PEB
Textbook Problem
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Journalize the entries to record the following selected bond investment transactions for Starks Products:

  1.     a.          Purchased for cash $120,000 of Iceline, Inc. 5% bonds at 100 plus accrued interest of $1,000.
  2.     b.          Received first semiannual interest payment.
  3.     c.          Sold $60,000 of the bonds at 101 plus accrued interest of $500.

(a)

To determine

Journalize the bond investment transactions of S Products.

Explanation of Solution

Bond investment: Bond investments are debt securities which pay a 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.

Prepare journal entry for purchase of $120,000, 5% bonds of I Incorporation at 100% with an accrued interest of $1,000.

DateAccount Titles and ExplanationsPost. Ref...

(b)

To determine

Prepare journal entry to record the interest revenue received.

(c)

To determine

Prepare journal entry for $60,000 bonds of I International sold at 101%, with an accrued interest of $100.

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Chapter 15 Solutions

Financial Accounting
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