Question

Bond Investment Transactions

Starks Products uses the cost method to account for investments in bonds. Journalize the entries to record the following selected bond investment transactions for Starks Products:

If an amount box does not require an entry, leave it blank.

a. Purchased for cash $150,000 of Iceline, Inc., 6% bonds at 100 plus accrued interest of $1,500.

b. Received first semiannual interest payment.

c. Sold $90,000 of the bonds at 102 plus accrued interest of $900.

Answer 1

Date	Account Titles and Explanation	Debit (in $ )	Credit (in $ )
(a)	Investment -In Bonds	$ 150,000
	Interest Receivable	$ 1,500
	Cash		$ 151,500
	(To record the Investment in Bonds )
(b)	Cash ($ 150,000 x 6% x 6/12]	$ 4,500
	Interest Receivable		$ 1,500
	Interest Revenue    - Bal. Fig.		$ 3,000
	(To record the first semi annual interest Payment)
(c )	Cash ( $ 90,000 x 102% + $ 900)	$ 92,700
	Investments - Starks Bonds		$ 90,000
	Interest Revenue		$ 900
	Gain on Sale of Bonds    - Bal. Fig.		$ 1,800
	(To record the sale of investments )