a. Purchased for cash $400,000 of Tyler City 6% bonds at 100 plus accrued interest of $2,000.
b. Received first semiannual interest payment.
c. Sold $200,000 of the bonds at 98 plus accrued interest of $1,000.
Answer:
a.
Investments—Tyler City Bonds 400,000
Interest Receivable 2,000
Cash 402,000
b.
Cash* 12,000
Interest Receivable 2,000
Interest Revenue 10,000
* $400,000 × 6% × 1/2
c.
Cash* 197,000
Loss on Sale of Investments 4,000
Interest Revenue 1,000
Investments—Tyler City Bonds 200,000
* Sales proceeds ($200,000 × 98%)…………………………$196,000
Accrued interest…………………………………………… 1,000
Total proceeds from sale……………………………………$197,000