The following transactions of Kelsey, Inc., occurred within the same accounting period:
(a) Purchased $55,000 U.S. Treasury 6% bonds, paying 102 plus accrued interest of $1,400. In addition, Kelsey paid brokerage fees of $500. Kelsey uses the revenue approach
to record accrued interest on purchased bonds. Kelsey classified this security as a trading security.
(b) Purchased 2,100 shares of Dulce Co. common stock at $67 per share plus brokerage fees of $1,300. Kelsey classifies this stock as an available-for-sale security.
(c) Received semiannual interest on the U.S. Treasury bonds.
(d) Sold 400 shares of Dulce at $81 per share.
(e) Sold $20,000 of U.S. Treasury 6% bonds at 101 plus accrued interest of $180.
(f) Purchased an $18,000, 6-month certificate of deposit. The certificate is classified as a trading security.
Prepare the entries necessary to record these transactions.
SOLUTION
(a) Investment in Trading Securities—Treasury Bonds 56,600*
Interest Revenue 1,400
Cash 58,000