Bocelli Co. purchased $135,000 of 6%, 20-year Sanz County bonds on May 11, 2016,
ID: 2470705 • Letter: B
Question
Bocelli Co. purchased $135,000 of 6%, 20-year Sanz County bonds on May 11, 2016, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, 2016, Bocelli Co. sold $28,800 of the Sanz County bonds at 96 plus $144 accrued interest, less a $85 brokerage commission. Provide journal entries for the following (refer to the Chart of Accounts for exact wording of account titles):
May 11 Purchase of the bonds, plus 40 days of accrued interest; assume a 360-day year.
Oct. 1 Semiannual interest 31 Sale of the bonds
Dec. 31 Adjusting entry for accrued interest of $1,593
Bocelli Co. purchased $135,000 of 6%, 20-year Sanz County bonds on May 11, 2016, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, 2016, Bocelli Co. sold $28,800 of the Sanz County bonds at 96 plus $144 accrued interest, less a $85 brokerage commission.
Provide journal entries for the following (refer to the Chart of Accounts for exact wording of account titles):
Provide journal entries for the transactions. Refer to the Chart of Accounts for exact wording of account titles.
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May 11 Purchase of the bonds, plus 40 days of accrued interest; assume a 360-day year. Oct. 1 Semiannual interest 31 Sale of the bonds Dec. 31 Adjusting entry for accrued interest of $1,593Explanation / Answer
Journal Entry Date Particulars Dr. Amt Cr. Amt. May-11 Investments - Sanz County Bonds Dr. 135,000 2016 Interest Receivable Dr. 900 To Cash 135,900 (Record the entry of purchase of Sanz County Bonds and interest receivables) Interest Receivable - $135000 X 6% X 40/360 = $900 Oct-01 Cash Dr. 4050 2016 To Interest Receivables 900 To Interest - Revenue 3150 (Record the interest recd from Sanz County Bonds) Oct-31 Cash Dr 27707 2016 Loss On Sale of Investment Dr. 1237 To Investment - Sanz County Bonds 28800 To Interest - Revenue 144 (Record the Bonds Sold) Cash recd from sale of Bonds = $28800 X 96/100 +144 (Accrued Interest) - $85 (Brookerage Comm.) Cash recd from sale of Bonds = 27707 Loss on Sale of Bonds = $28800 +144 (Int. Accrued On Bonds) - $27648 (Sale Value of Bonds) + $85 (Brokerage Comm.) Loss on Sale of Bonds = $1237 Dec-31 Intrest Receivables Dr. 1593 2016 To Interest revenue 1593 (Record the interest accrued on Sanz County Bonds)