PROBLEM 10-43 ADJUSTMENT OF BOND INVESTMENT ACCOUNT In auditing the books for the Carmichael Corporation as of December 31, 2002, before the accounts are closed, you find the following long-term investment account balance.

Account: INVESTMENT IN BIG OIL 9% BONDS (MATURITY DATE, JUNE 1, 2006)

Date Item Balance Debit Credit Debit CrecJit 2002 Jan. 21 Mar. 1 June 1 Nov. 1 Dec. 1 Bonds, $200,000 par, acquired at 102 plus accrued interest Proceeds from sole of bonds, $100,000 par and accrued interest Interest received Amount received on coll of bonds, $40,000 par, at 101 plus accrued interest Interest received 206,550 106,000 4,500 41,900 2,700 206,550 100,550 96,050 54,150 51,450 Instructions:

1. Give the entries that should have been made relative to the investment in bonds, including any adjusting entries that would be made on December 3 1 , the end of the fiscal year. (Assume bond premium or discount amortization is by the straightline method and ignore any potential impact of year-to-year market value changes on the accounting for the bonds.)

2. Give the journal entries required at the end of 2002 to correct and bring the accounts up to date in view of the entries actually made.