EX 15-2 Entries for investments in bonds, interest, and sale of bonds

Mars Investments acquired $150,000 of Pluto Corp., 8% bonds at their face amount on September 1, 2014. The bonds pay interest on September 1 and March 1. On March 1, 2015, Mars sold $75,000 of Pluto Corp. bonds at 102.

Journalize the entries to record the following:
a. The initial acquisition of the Pluto Corp. bonds on September 1, 2014.
b. The adjusting entry for four months of accrued interest earned on the Pluto Corp. bonds on December 31, 2014.
c. The receipt of semiannual interest on March 1, 2015.
d. The sale of $75,000 of Pluto Corp. bonds on March 1, 2015, at 102.


Answer:

2014
a. Sept. 1 Investments—Pluto Corp. Bonds 150,000
Cash 150,000
2014
b.
 Dec. 31 Interest Receivable 4,000
Interest Revenue 4,000
Accrued interest, $150,000 × 8%
× 4/12.
2015
c.
 Mar. 1 Cash 6,000
Interest Receivable 4,000
Interest Revenue* 2,000
*$150,000 × 8% × 2/12
2015
d.
 Mar. 1 Cash* 76,500
Gain on Sale of Investments 1,500
Investments—Pluto Corp. Bonds 75,000
*$75,000 × 102%