On January 1, Year 1, Reid Corporation acquired bonds with a face value of $700,000 for $673,618.61. The bonds carry a stated rate of interest of 10%, were purchased to yield 11%, pay interest semiannually on June 30 and December 31, were purchased to be held to maturity, and are due December 31, Year 4. On January 1, Year 2, in contemplation of a major acquisition, the bonds were sold for $700,000. Reid uses the effective interest method.

Required:

Prepare journal entries to record the purchase of the bonds, the interest receipts on June 30, Year 2, and December 31, Year 2, and the sale of the bonds.

CHART OF ACCOUNTS Reid Corporation General Ledger ASSETS 111 Cash 121 Accounts Receivable 137 Interest 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 REVENUE 411 Sales Revenue 431 Interest Income 434 Gain on Sale of Debt Securities 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 599 Loss on Sale of Investment 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings