On August 1, 2021, Chen Corporation, a public company, purchased $100,000 of Alaska Ltd. five-year, 7% bonds at par. The bonds were purchased for trading purposes and pay interest semi-annually on January 31 and July 31 of each year. On December 31, 2021, Chen’s year end, the bonds’ fair value was $101,000. The bonds were sold on February 1, 2022, for $102,000.

Instructions

a. Record the purchase of the bonds on August 1, 2021.

b. Record any adjusting journal entries that are required at December 31, 2021.

c. Indicate how the investment is presented on Chen Corporation’s December 31, 2021, balance sheet.

d. Record the receipt of the first interest payment on January 31, 2022.

e. Record the sale of the bonds on February 1, 2022.