Appendix D – Investments
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Page 41
ANSWER:
(a)
Investments—Daytona Beach Bonds
400,000
Interest Receivable
4,500
Cash
404,500
(b)
Cash
10,000*
Interest Receivable
4,500
Interest Revenue
5,500
*$400,000 × 5% × 1/2
(c)
Cash
244,300
Loss on Sale of Investments
7,500
Interest Revenue
1,800
Investments—Daytona Beach Bonds
250,000
Sale proceeds ($250,000 × 97%)
$242,500
Accrued interest
1,800
Total proceeds from sale
$244,300
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.21 – Corporate Investments Accounting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 5:16 PM
DATE MODIFIED:
7/22/2017 5:16 PM
114. On August 1, Year 1, Ant Company sold Bee Company $1,500,000 of 10-year, 6% bonds, dated July 1 at 100 plus
accrued interest. On March 1, Year 2, Bee sold half of the bonds for $782,500 plus accrued interest. Present entries to
record the following transactions:
Bee Company:
(a)
Purchase of bonds on August 1, Year 1.
(b)
Receipt of first semiannual interest amount on December 31, Year 1.
(c)
The sale of the bonds on March 1, Year 2.
ANSWER:
(a)
Investments—Ant Co. Bonds
1,500,000
Interest Receivable ($1,500,000 × 6% × 1/12)
7,500
Cash
1,507,500
(b)
Cash
45,000
Interest Revenue
37,500
Interest Receivable
7,500
(c)
Cash
790,000
Interest Revenue ($750,000 × 6% × 2/12)
7,500
Gain on Sale of Investments
32,500
Investments—Ant Co. Bonds
750,000
POINTS:
1
DIFFICULTY:
Moderate
