The following bond investment transactions were completed during 2012 by Mission Company:
Jan. 21. Purchased 50, $1,000 par value
 government bonds at 100 plus 20 days’ accrued interest. The bonds pay 4.5% annual interest on June 30 and January 1.
June 30. Received semiannual interest on bond investment.
Sept 5. Sold 24, $1,000 par value bonds at 97 plus $201 accrued interest.
a. Journalize the entries for these transactions.
b. Provide the December 31, 2012, adjusting journal entry for semiannual interest earned from the bond.
 

a. 2012

 

 

Jan. 21 Investments-Government Bonds.............. 50,000

 

 

Interest Receivable......................................... 125*

 

 

Cash.................................................................. 50,125

 

 

 

*$50,000 × 4.5% × 20/360

 

 

 

June 30 Cash............................................................. 1,125*

 

 

Interest Receivable........................................... 125

 

 

Interest Revenue............................................... 1,000

 

 

 

*$50,000 × 4.5% × Â½

 

 

 

Sept. 5 Cash........................................................... 23,481*

 

 

Loss on Sale of Investments............................. 720

 

 

Interest Revenue............................................... 201

 

 

Investments-Government Bonds................... 24,000

 

 

 

*Bond sale ($24,000 × 97%)..................... $23,280

 

 

Accrued interest............................................ 201

 

 

Total proceeds from sale.......................... $23,481

 

 

 

b. 2012

 

 

Dec. 31 Interest Receivable........................................... 585

 

 

Interest Revenue............................................... 585

 

 

Accrued interest, $26,000 × 4.5% × Â½.