2E On January 1, 2017, Dagwood Comp... [FREE SOLUTION]

Chapter 12: 2E (page 610)

On January 1, 2017, Dagwood Company purchased at par 6%
bonds having a maturity value of $300,000. They are dated January 1, 2017, and mature January 1, 2022, with interest received
on January 1 of each year. The bonds are classified in the held-to-maturity category.
Instructions
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare the journal entry to record the interest revenue on December 31, 2017.
(c) Prepare the journal entry to record the interest received on January 1, 2018.

Expert verified

a) Bond Investment account debited with $300,000

b) Interest revenue account credited with $18,000

c) Interest received account credited with $18,000

A bond is a type of debt security issued by the government and companies

Date	Description	Debit	Credit

January 1, 2017	Debt Investment	$300,000
	Cash		$300,0000
	Being entry to record the purchase of bonds.

Date	Description	Debit	Credit

December 31, 2017	Cash	$18,000
	Interest Revenue		$18,000
	Being the entry for bond interest revenue.

Date	Description	Debit	Credit

January 1, 2018	Cash	$18,000
	Interest Received		$18,000
	Being the entry for bond interest received.

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Cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years (uses straight-line depreciation)	$280,000
Materials consumed in R&D projects	59,000
Consulting fees paid to outsiders for R&D projects	100,000
Personnel costs of persons involved in R&D projects	128,000
Indirect costs reasonably allocable to R&D projects	50,000
Materials purchased for future R&D projects	34,000

Attorney fees in connection with organization of the company	\(15,000
Purchase of drafting and design equipment	10,000
Costs of meetings of incorporators to discuss organizational activities	7,000
State filing fees to incorporate	1,000
	\)33,000