Gillooly Co. purchased $81,000 of 5%, 15-year Lumpkin County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Gillooly Co. sold $30,000 of the Lumpkin County bonds at 102 plus $125 accrued interest less a $670 brokerage commission. Journalize the entries to record the following: Do not round interim calculations. Round final answers to nearest dollar. If an amount box does not require an entry, leave it blank. Assume a 360-day year. a. The purchase of the bonds on May 11 plus 40 days of accrued interest. Year 1 May 11 - Select - - Select - - Select - - Select - - Select - - Select - b. Semiannual interest on October 1. Year 1 Oct. 1 - Select - - Select - - Select - - Select - - Select - - Select - c. Sale of the bonds on October 31. Year 1 Oct. 31 - Select - - Select - - Select - - Select - - Select - - Select - - Select - - Select - d. Adjusting entry for accrued interest on December 31, Year 1. Year 1 Dec. 31 - Select - - Select - - Select - - Select - e. The receipt of the face value of the remaining bonds at their maturity on April 1, Year 20. Year 20 Apr. 1 - Select - - Select - - Select - - Select -

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gillooly Co. purchased $81,000 of 5%, 15-year Lumpkin County bonds on May 11, Year 1, directly from the county, at their face amount plus accrued interest. The bonds pay semiannual interest on April 1 and October 1. On October 31, Year 1, Gillooly Co. sold $30,000 of the Lumpkin County bonds at 102 plus $125 accrued interest less a $670 brokerage commission.

Journalize the entries to record the following: Do not round interim calculations. Round final answers to nearest dollar. If an amount box does not require an entry, leave it blank. Assume a 360-day year.

a. The purchase of the bonds on May 11 plus 40 days of accrued interest.

Year 1 May 11	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -

b. Semiannual interest on October 1.

Year 1 Oct. 1	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -

c. Sale of the bonds on October 31.

Year 1 Oct. 31	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -
	- Select -	- Select -

d. Adjusting entry for accrued interest on December 31, Year 1.

Year 1 Dec. 31		- Select -	- Select -
		- Select -	- Select -

e. The receipt of the face value of the remaining bonds at their maturity on April 1, Year 20.

Year 20 Apr. 1		- Select -	- Select -
		- Select -	- Select -

Expert Solution

Step 1: Introduction to bonds:

Bonds are debt securities issued by governments, municipalities, corporations, or other entities to raise capital. When you purchase a bond, you are essentially lending money to the issuer in exchange for periodic interest payments (referred to as coupon payments) and the return of the bond's face value (also known as the principal or par value) at a specified future date, known as the bond's maturity date.

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