Parilo Company acquired $180,000 of Makofske Co., 6% bonds on May 1, 2016, at th

Question

Parilo Company acquired $180,000 of Makofske Co., 6% bonds on May 1, 2016, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 2016, Parilo Company sold $55,800 of the bonds for 99.

Journalize entries to record the following (refer to the Chart of Accounts for exact wording of account titles):

Chart of Accounts

Journal

Journalize entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

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Adjusting Entries

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May 1 Initial acquisition of the bonds Nov. 1 Semiannual interest received 1 Sale of the bonds Dec. 31 Accrual of $1,242 interest

Explanation / Answer

Journal entry:

Date accounts & explanation debit Credit May 1 Investments-Makofske Co. Bonds 180000 Cash 180000 (To record acquisition of bonds) Nov 1 Cash (180000*6%*6/12) 5400 Interest revenue 5400 (To record interest received) Nov 1 Cash (55800*99%) 55242 Loss on Sale of Investments 558   Investments-Makofske Co. Bonds 55800 (To record sale of bonds investment) Dec 31 Interest receivable (180000-55800)*6%*2/12 1242 Interest revenue 1242 (To record adjusting entry)

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