Question

Entries for Investments in Bonds, Interest, and Sale of Bonds Kalyagin Investments acquired $220,000 of Jerris Corp., 7% bonds at their face amount on October 1, 20Y2. The bonds pay interest on October 1 and April 1. On April 1, 20Y3, Kalyagin sold $80,000 of Jerris bonds at 103.

Journalize the entries to record the following:

a. The initial acquisition of the Jerris Corp. bonds on October 1, 20Y2.
b. The adjusting entry for three months of accrued interest earned on the Jems Corp. bonds- or December 11, 20Y2.
c. The receipt of semiannual interest on April 1. 20Y3.
d. The sale of 580,000 of Jerris Corp. bonds on April, 20Y3, at 103.

Answer 1

a. Investments in Jerris Corp. bonds (Dr.) $220,000

Cash (Cr.) $220,000

b. Interest Receivable (Dr.) $3,850

Interest received (Cr.) $3,850

c. Cash (Dr.) $7700

Interest Received (Cr.) $3,850

Interest Receivable (Cr.) $3,850

d. Cash (Dr.) $80,000

Investment in Jerris Corp. bonds (Cr.) $80,000

Step-by-step explanation:

Interest received is the amount interest that is accrued on the bond over the period of time.

Interest accrued = Amount of investment * Coupon rate * time proportion

Interest accrued = 220,000 * 7% * 3/12

Interest accrued = $3,850.