Problem: Aslan County purchased $3,000,000 of bonds as a General Fund investment on March 1, 20X7, for $3,060,000 plus four months accrued interest of $80,000. The bonds mature in four years and two months.

1. The county received the semiannual interest payment on the bonds ($120,000) on April 30, 20X7.

2. The county received the October 31 semiannual interest payment ($120,000).

3. On December 31, the end of Aslans fiscal year, the fair value of its bond investment was $3,065,000 (excluding accrued interest).

Required

(a) Record these transactions in the General Ledger accounts of the Aslan County General Fund.

(b) Compute the investment income that should be reported for this investment.

The following is my solution but I am questioning my results. I see where other have provided the same solution to this problem that did not include the (1) 80/40 entry and instead recorded a 120/ 120 entry for both (1) and (2) ? I also see where other did not include the entry I have for (3a ), instead they skipped from entry (2) straight to entry (3b). Im looking for some clarifcation please. If someone could, please look at the problem and work it so that I may see if I am on the right or the wrong track here

MY SOLUTION:

Aslan County

General Ledger

a. Investments............................................................................ 3,060,000

Accrued Interest Receivable.................................................. 80,000

Cash................................................................................ 3,140,000

(Entry to record purchase of investment.)

(1) Cash....................................................................................... 120,000

Accrued Interest Receivable.......................................... 80,000

RevenuesInterest........................................................ 40,000

(Entry to record receipt of interest)

2. Cash....................................................................................... 120,000

RevenuesInterest........................................................ 120,000

(Entry to record receipt of Interest)

3a. Accrued Interest Receivable.................................................. 40,000

RevenuesInterest........................................................ 40,000

(Entry to record accrued interest at year end.)

3b. Investments............................................................................ 5,000

RevenuesIncrease in Fair Value of Investments........ 5,000

(Entry to record change in investments' fair value.)

Answer to Part (b.)Interest income ($40,000 + $120,000 + $40,000)................. $200,000

Net increase in fair value of investments............................... 5,000

Investment income......................................................... $205,000