On September 1, Parsons Company purchased $84,000, 10-year, 7% government bonds at 100 plus accrued interest. The semiannual interest payment dates are June 30 and December 31. Interest calculations are done by the month. Required:a. Journalize the entry to record the bond purchase. b. Journalize the receipt of interest on December 31 of the first year. c. Journalize the sale of the bonds on February 1 of the second year for $82,000 plus accrued interest. If an amount box does not require an entry, leave it blank. a. Year 1 Sept. 1 b. Year 1 Dec. 31 c. Year 2 Feb. 1

Question

String Bean

Business

17 October, 12:18

On September 1, Parsons Company purchased $84,000, 10-year, 7% government bonds at 100 plus accrued interest. The semiannual interest payment dates are June 30 and December 31. Interest calculations are done by the month. Required:a. Journalize the entry to record the bond purchase. b. Journalize the receipt of interest on December 31 of the first year. c. Journalize the sale of the bonds on February 1 of the second year for $82,000 plus accrued interest. If an amount box does not require an entry, leave it blank. a. Year 1 Sept. 1 b. Year 1 Dec. 31 c. Year 2 Feb. 1

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Marely Galvan · Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Sept 1

Investment Dr, $84,000

Interest receivable Dr, $980

($84,000 * 7%) * (2 : 12)

To Cash $84,980

(Being purchase of government bonds is recorded)

Dec 31

Cash Dr, $2,490

($84,000 * 7%) * (6 : 12)

To Interest receivable $980

To Interest revenue $1,960

(Being Interest received is recorded)

Feb 1

Cash Dr, $82,490

($84,000 + $490)

Loss on sale of investment Dr, $2,000

($84,000 - $82,000)

To Investment $84,000

To Interest revenue $490

($84,000 * 7%) * (1 : 12)

(Being sale of bonds is recorded)