EX 15-1 Entries for investment in bonds, interest, and sale of bonds

Sorrey Company acquired $75,000 of Clayton Co., 6% bonds on April 1, 2014, at their face amount. Interest is paid semiannually on April 1 and October 1. On October 1, 2014, Sorrey Company sold $25,000 of the bonds for 98.

Journalize entries to record the following:
a. The initial acquisition of the bonds on April 1.
b. The semiannual interest received on October 1.
c. The sale of the bonds on October 1.
d. The accrual of $750 interest on December 31, 2014.


Answer:

2014
a.
 Apr. 1 Investments—Clayton Co. Bonds 75,000
Cash 75,000
2014
b.
 Oct. 1 Cash 2,250
Interest Revenue 2,250
$75,000 × 6% × 6/12.
2014
c. Oct. 1 Cash* 24,500
Loss on Sale of Investments 500
Investments—Clayton Co. Bonds 25,000
*$25,000 × 98%
2014
d. Dec. 31 Interest Receivable 750
Interest Revenue 750
Accrued interest.