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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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  1. 17 October, 12:27
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    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)
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