On January 1, 2018, Kelly Corporation acquired bonds with a face value of $400,000 for $387,330.92, a price that yields a 11% effective annual interest rate. The bonds carry a 10% stated rate of interest, pay interest semiannually on June 30 and December 31, are due December 31, 2021, and are being held to maturity.

Required:

Prepare journal entries to record the purchase of the bonds and the first two interest receipts using the:

1.	straight-line method of amortization
2.	effective interest method of amortization

CHART OF ACCOUNTS

Kelly Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation
191	Investment in Held-to-Maturity Debt Securities

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Income

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare journal entries to record the purchase of the bonds on January 1 and the first two interest receipts on June 30 and December 31 using the straight-line method of amortization. Additional Instructions

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GENERAL JOURNAL !(Need debit credit amounts)!

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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Prepare journal entries to record the purchase of the bonds on January 1 and the first two interest receipts on June 30 and December 31 using the effective interest method of amortization. Additional Instructions

PAGE 1

GENERAL JOURNAL !(Need debit credit amounts)!

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8