00:02
In this question, brooks has purchased bonds from ag.
00:10
Brooks has purchased 70 bonds, 9 % tenure bonds.
00:23
The value of bonds is 1000.
00:30
Now, we are asked to prepare the journal entries.
00:34
To record, purchase, receipt of interest and sale.
00:51
Here, after the receipt of interest, brooks is selling 40 bonds.
01:02
So, first we can record the purchase entry.
01:09
In order to record the purchase, date, account title, debit and credit.
01:25
Here, debt investment should be debited because the value of investment is increasing.
01:34
So, it should be debited by 70 ,000 euro because it is purchasing 70 bonds for 1000 euros.
01:45
Per bond value is 1000, so it is 70 ,000.
01:49
And it is purchasing for cash, so it should be debited by 70 ,000.
02:00
Now, the receipt of interest.
02:07
Date, account title, debit and credit.
02:18
So, now in order to record the receipt of interest, the interest receivable should be debited.
02:27
Because interest receivable is an asset and it is increasing.
02:31
And the interest revenue, the revenue account should be credited because the value of equity increases.
02:40
Here, the value of the bond is 70 ,000 and the interest rate is charged at 9%...