225k views
1 vote
On February 1, 2020, Aggie Corporation sold its investment in Smith Corporation bonds for $12,500. The bonds have a face value of $12,000 and a stated interest rate of 10%. The market value of the bonds on December 31, 2019 was $12,300.Required: Prepare the journal entries to record the sale of the bonds and the adjustments of the unrealized gain or loss

User Madmax
by
7.6k points

1 Answer

4 votes

Answer:

Journal Entries

Date Account Titles and Explanation Debit Credit

Feb. 1 Cash $12,500

Bonds $12,300

Gain on sale of bonds $200

(Being bond issued at premium)

Feb. 1 Unrealized Gain $300

Income Summary $300

(Being unrealized gain transferred)

Notes:

1) The Unrealized gain will be transferred to income statement at the time of sale. $300 ($12,300 - $12,000)

2) It is assumed that interest receivable for January month is included while calculating the selling price of bonds, hence no need to consider again.

User Rohan Seth
by
8.2k points

No related questions found