The journal entry Pierce will record on February 1 will include a

A) credit to Interest Revenue for $1,500
B) credit to Gain on Sale of Investments for $1,500
C) credit to Cash for $52,500
D) credit to Interest Receivable for $600

When Pierce sells the bonds, it will realize a gain equal to the difference between the selling price and the carrying value of the bonds, which includes the initial cost and any accrued interest. In this case, the carrying value of the bonds at the time of sale is $63,600 ($60,000 + $2,400 accrued interest), and the selling price is $66,950 ($50,000 x 103% + $1,150 accrued interest). Therefore, the gain on sale of investments is $3,350 ($66,950 - $63,600), and this amount should be credited to recognize the gain.