Prepar the appropriate journal entries to record the transactions for the year,
ID: 2422222 • Letter: P
Question
Prepar the appropriate journal entries to record the transactions for the year, 20X1, including any year-end adjustments. Show calculation, rounded to the nearest dollar. On January 1, 20X1, Jeff Corporation used excess cash to purchase U.S. Treasury bonds for $100,000. The bonds were purchased at face value. The appropriate interest rate is 6%. Interest on these bonds is payable On January 1 and July 1 of each year. Jeff's investment is accounted for as held to maturity. The fair value of the Treasury bonds is $102,000 at year-end.
Explanation / Answer
January 1, 20X1
6% US Treasury bonds a/c ...... Dr 100000
To Cash a/c 100000
July 1,20X1
Cash/Bank a/c ........................Dr 3000
To interest received on 6% US TReasury bonds 3000
interest @6% for half year
Dec 31, 20X1
Interest receivable a/c Dr 3000
To interest received on 6% US TReasury bonds 3000
Interest accrual for second half year
Since these are held to maturity, changes in value will not be recognised