Journalize the entries to record the following selected bond investment transactions for Starks Products:

Journalize the entries to record the following selected bond investment transactions for Starks Products:

a. Purchased for cash $120,000 of Iceline, Inc. 5% bonds at 100 plus accrued interest of $1,000.
b. Received first semiannual interest payment.
c. Sold $60,000 of the bonds at 101 plus accrued interest of $500.


Answer:


a.
 Investments—Iceline Inc. Bonds 120,000
Interest Receivable 1,000
Cash 121,000
b.
 Cash* 3,000
Interest Receivable 1,000
Interest Revenue 2,000
* $120,000 × 5% × 1/2
c.
 Cash* 61,100
Interest Revenue 500
Gain on Sale of Investments 600
Investments—Iceline Inc. Bonds 60,000
* Sales proceeds ($60,000 × 101%)……………………… $60,600
Accrued interest…………………………………………… 500
Total proceeds from sale………………………………… $61,100