Afton Co. Purchased $24,000 of 4%, 10-year Davis Country bonds on July 12, 2012, directly from the country at par value. The bonds pay semiannual interest on May 1 and November 1. On December 1, 2012, Afton Co. sold $6,000 of the Davis County bonds at 98 plus $20 accrued interest, less a $100 brokerage commission.
Provide the journal entries for:
a. The purchase of the bonds on July 12, plus 72 days of accrued interest.
b. Semiannual interest on November 1.
c. Sale of the bonds on December 1.
d. adjusting entry for accrued interest of $120 on December 31, 2012.

a. 2012

 

 

July 12 Investments-DavisCounty Bonds............ 24,000

 

 

Interest Receivable......................................... 192*

 

 

Cash.................................................................. 24,192

 

 

 

*$24,000 × 4% × 72/360

 

 

 

b. Nov. 1 Cash................................................................ 480*

 

 

Interest Receivable........................................... 192

 

 

Interest Revenue............................................... 288

 

 

 

 

 

*$24,000 × 4% × Â½

 

 

 

c. Dec. 1 Cash............................................................. 5,800*

 

 

Loss on Sale of Investments............................. 220

 

 

Interest Revenue............................................... 20

 

 

Investments-DavisCounty Bonds................. 6,000

 

 

 

 

*Bond sale ($6,000 × 0.98)........................... $5,880

 

 

Accrued interest.................................................. 20

 

 

Less brokerage commission............................ (100)

 

 

Total proceeds.............................................. $5,800

 

 

 

d. Dec. 31 Interest Receivable........................................... 120

 

 

Interest Revenue............................................... 120

 

 

To accrue interest.