On May 1, 2021, Sunland Company purchased $1,550,000 of 12% bonds, interest payable on January 1...

On May 1, 2021, Sunland Company purchased $1,550,000 of 12% bonds, interest payable on January 1 and July 1, for $1,406,500 plus accrued interest. The bonds mature on January 1, 2027. Amortization is recorded when interest is received by the straight-line method. (Assume bonds are available for sale.)

Prepare the journal entry for May 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
May 1, 2021

The bonds are sold on August 1, 2022 for $1,412,500 plus accrued interest. Prepare all entries required to properly record the sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit


(To record amortization)


(To record interest)



(To record the sale of the bonds)

Expert Solution

Answer

Journal entry

No.	Account Titles and Explanations	Debit	Credit
a	Debt Investments	$ 14,06,500
	Interest Revenue	$ 62,000
	($15,50,0000.124/12)	$ 62,000
	Cash		$ 14,68,500

b	Debt Investments	$ 2,110
b	(1$143,500/68*1)	$ 2,110
	Interest Revenue		$ 2,110

c	Cash	$ 15,500
c	($15,50,0000.121/12)	$ 15,500
	Interest Revenue		$ 15,500

d	Cash	$ 14,12,500
	Loss on Sale of Investments	$ 25,654
	Debt Investments		$ 14,38,154
	$1406,500+ ($143,500/68)*15

The bond period is for 5 years 8 months = 68 months


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ekkarill92 answered 2 years ago

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