Gaelic Industries Inc. is an athletic footware company that began operations on January 1, 2016. The following transactions relate to debt investments acquired by Gaelic Industries Inc., which has a fiscal year ending on December 31:

Record these transactions on page 10

2016
May	1	Purchased $75,000 of Avery Co. 7%, 15-year bonds at their face amount plus accrued interest of $875. The bonds pay interest semiannually on March 1 and September 1.
	16	Purchased $60,000 of Clawhammer 6%, 10-year bonds at their face amount plus accrued interest of $150. The bonds pay interest semiannually on May 1 and November 1.
Sept.	1	Received semiannual interest on the Avery Co. bonds.
	30	Sold $30,000 of Avery Co. bonds at 98 plus accrued interest of $175.
Nov.	1	Received semiannual interest on the Clawhammer bonds.
Dec.	31	Accrued $1,050 interest on the Avery Co. bonds.
	31	Accrued $600 interest on the Clawhammer bonds.

Record these transactions on page 11

2017
Mar.	1	Received semiannual interest on the Avery Co. bonds.
May	1	Received semiannual interest on the Clawhammer bonds.

Required:

1.	Journalize the entries to record these transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. In your computations, round per share amounts to two decimal places.
2.	If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

X

Journal

Shaded cells have feedback.

1. Journalize the entries to record the transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. In your computations, round per share amounts to two decimal places.

Question not attempted.

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JOURNAL

Score: 0/331

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
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May 1: Record the investment debit, interest receivable debit for accrued interest, and the cash paid is equal to the interest plus the investment.

Sept. 1 and Nov. 1: Bond principal x interest rate x half a year = total interest. Record this amount as a debit to Cash. Reduce interest receivable (credit) by the amount calculated on Mar. 1 for the Buncombe bonds or Mar. 16 for the French Broad bonds and increase interest revenue (credit) for the difference between the cash and the interest receivable adjustment.

Dec. 31, 2016: Calculate the proceeds: 99% x face amount of bonds sold, plus accrued interest. Debit cash for this amount. Credit investments for the face amount of bonds sold and credit interest revenue for the accrued interest amount. To complete the entry, enter the difference between the cash sale amount and the face investment amount + accrued interest as a gain or loss.

Dec. 31: Debit Interest Receivable and credit Interest Revenue for the accrued interest.

Mar. 1, 2016: Calculate remaining bond principal after Aug. 31 sale. Bond principal x interest rate x half a year = total interest. Record this amount as a debit to Cash. Reduce interest receivable (credit) by accrued interest recorded on Dec. 31 and increase interest revenue (credit) for the difference between the cash and the interest receivable adjustment.

May 1, 2016: Bond principal x interest rate x half a year = total interest. Record this amount as a debit to Cash. Reduce interest receivable (credit) by accrued interest recorded on Dec. 31 and increase interest revenue (credit) for the difference between the cash and the interest receivable adjustment.

Answer rating: 100% (QA)

ANSWER Date Accounts title and explanations Ref May 1 Investment Avery cobond 2... View the full answer