Hello,
I am preparing a journal entry for an investment account and have questions. I'm comfortable with almost all of the journal entry, except for the change in value of T-notes. I was previously told that T-Notes earn interest, so there are no realized gains or losses when redeemed.
The difference between the beginning and ending balances for the T-notes was a decrease. One of the T-notes was redeemed, but the amount it was redeemed for is greater than the decrease of the balances. There was a small amount of interest earned when the T-note was redeemed. I also notice that there is accrued interest, which I don’t know if I am supposed to record this.
Here are some fake numbers to help explain.
Beginning balance: $40,800
Ending balance: $34,146
Difference: $6,654
T-Note redeemed: $6,900
Difference: ($346)
Interest on T-Note: $3
On the brokerage statement, the T-Note and interest were deposited to the cash/sweep account.
Where do I record the difference of $346? Does this represent the accrued interest?
Proposed Journal Entry
Debit Cash $7,000 Record redeemed T-Note
Debit Cash $3 Record interest earned on T-Note
Credit T-Notes $6,654 Record change in value
Credit Interest & Dividends $3 Record interest earned on T-Note
Credit ??? $346 ????
Thank you!!
