Patterson Corp. carries an account in its general ledger called Investments, whi
ID: 2350400 • Letter: P
Question
Patterson Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.**Feb. 1, 2010 Shazz Company common stock, $100 par, 200 shares- $37,400
**April 1, 2010- U.S. government bonds, 11%, due April 1, 2020, interest payable April 1 and October 1, 110 bonds of $1,000 par each- $110,000
**July 1, 2010- McDaniel Company 12% bonds, par $50,000, dated March 1, 2010 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2030- $54,000
INSTRUCTIONS:
Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2010, using the straight-line method. **I know the Accounts to be used are Interest Receivable (debit), Interest Revenue (credit), & Investments (credit).
Explanation / Answer
Interest Receivable .........................................8,025
Debt Investments (Available-for-Sale) ....................................-------------------------- 51
Interest Revenue....................................................................... ---------- 7,974
[Accrued interest[$50,000 X .12 X 10/12 = = $5,00
Premium amortization[6/236 X $2,000 = (51)
[Accrued interest[$110,000 X .11 X 3/12 = 3,025
=$7,974