On May 1, 2004, Gipson Corp. purchased $270,000 of 12% bonds, interest payable on January 1 and July 1, for $253,680 plus accrued interest. The bonds mature on January 1, 2010. Amortization is recorded when interest is received by the straight-line method (by months and round to the nearest dollar). (Assume bonds are available for sale.)
Instructions:
(a) Prepare the entry for May 1, 2004.
(b) The bonds are sold on August 1, 2005 for $255,000 plus accrued interest. Prepare all entries required to properly record the sale.