On Sept. 1, 2012, Parsons Company purchased $84,000 10 year 7% government bonds at 100 plus accrued interest. The semi-annual interest payment dates are June 30 and Dec. 31. Journalize the entry to record the bond purchase.
To journalize the entry to record the bond purchase, you would need to follow these steps:
Step 1: Determine the cost of the bonds
The cost of the bonds is calculated by adding the purchase price ($84,000) and any accrued interest. Since we do not have information about the accrued interest, we cannot determine the exact cost. If there is any accrued interest, it should be recorded separately before journalizing the purchase entry.
Step 2: Identify the accounts involved
The two accounts involved in this transaction are "Investments" (representing the bonds) and "Cash" (representing the payment made to purchase the bonds).
Step 3: Determine the amounts for each account
Since the purchase price of the bonds is given as $84,000, the "Cash" account will be debited for $84,000. The "Investments" account will be credited for the same amount.
The journal entry will be as follows:
Date: Sept. 1, 2012
Account Debit Credit
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Cash $84,000
Investments $84,000
This entry records the purchase of the government bonds by debiting the "Cash" account and crediting the "Investments" account.