Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be
A) debit Cash, $105,000; credit Investment-Evans Company Bonds, $104,500, and Interest Revenue, $500
B) debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000
C) debit Cash, $104,500, and Interest Receivable, $500; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500
D) debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500

Question

Quizplus · Accepted Answer

The correct entry involves debiting Cash for the total amount received ($105,000), crediting the Investment account for the original cost ($100,000), recognizing the gain on sale of the investments ($4,500), and recording the interest revenue earned ($500). This accurately reflects the increase in cash, removal of the bond investment at cost, recognition of the gain from selling the bonds above cost, and the interest income earned.

Ruben Company Purchased $100,000 of Evans Company Bonds at 100