Entries for Investment in Bonds, Interest, and Sale of Bonds

Parilo Company acquired $202,200 of Makofske Company, 5% bonds on May 1, 20Y5, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 20Y5, Parilo sold $49,800 of the bonds for 97.

Journalize the entries to record the following under the cost method:

If an amount box does not require an entry, leave it blank.

a. The initial acquisition of the bonds on May 1.

20Y5 May 1	Investments-Makofske Co. Bonds
	Cash

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a. Record the investment at face value.

b. The semiannual interest received on November 1.

20Y5 Nov. 1	Cash
	Interest Revenue

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b. Record the interest revenue as earned. Bond Principal x Interest Rate x Time = Total Interest

c. The sale of the bonds on November 1.

20Y5 Nov. 1

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c. Calculate the proceeds: First compute the % x face amount of bonds sold. To complete the entry, determine any gain or loss on the transaction.

d. The accrual of $1,270 interest on December 31, 20Y5.

20Y5 Dec. 31