Question

Sheridan Company purchased 70 Rinehart Company 5%, 10-year, $1,900 bonds on January 1, 2020, for $133,000. The bonds pay interest annually on January 1. On January 1, 2021, after receipt of interest, Sheridan Company sold 40 of the bonds for $73,150.

Required:
Prepare the journal entries to record the transactions described above.

Answer 1

Date Account Details Debit Credit

Jan. 1, 2020 Debt Investment $133,000

Cash $133,000

Date Account Details Debit Credit

Dec. 1, 2020 Interest Receivable $6,650

Interest revenue $6,650

= 133,000 * 5%

= $6,650

Date Account Details Debit Credit

Jan. 1, 2021 Cash $6,650

Interest receivable $6,650

Date Account Details Debit Credit

Jan. 1, 2021 Cash $73,150

Loss on sale of investment $2,850

Debt investment $76,000

40 bonds are supposed to be:

= 40 * 1,900 = $76,000

Loss = 76,000 - 73,150 = $2,850