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20 May, 07:34

Gonzalez Company acquired $200,000 of Walker Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $70,000 of the bonds for 97. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank.

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  1. 20 May, 08:38
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    Answer and Explanation:

    The journal entries are shown below:

    a. Investment Dr $200,000

    To Cash $200,000

    (Being the acquirement is recorded)

    b. Cash Dr $6,000

    To Interest revenue $6,000

    (Being the cash is recorded)

    The computation is shown below:

    = $200,000 * 6% * 6 months : 12 months

    = $6,000

    c. Cash $67,900 ($70,000 * 97%)

    Loss on sale of investment $2,100

    To Investment $70,000

    (Being the cash is recorded)

    d. Interest receivable $1,300

    To Interest revenue $1,300

    (Being the interest receivable is recorded)

    = ($200,000 - $70,000) * 6% * 6 months : 12 months

    = $1,300
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