P 12-9 Securities held-to-maturity; trading securities and equity investments LO12-1, LO12-2, LO12-3,LO12-5Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the companybuys and sells securities. The following selected transactions relate to Amalgamated's investment activities during the last quarter of 2024 and the firstmonth of 2025. The only securities held by Amalgamated at October 1, 2024 were $30 million of 10% bonds of Kansas Abstractors, Inc., purchased onMay 1, 2024 at face value and held in Amalgamated's trading securities portfolio. The company's fiscal year ends on December 31.2024Oct. 1831Nov. 11Dec. 120212329312025Jan. 7Purchased 2 million shares of Millwork Ventures Company common stock for $58 million. Millwork has a total of 30 million sharesissued.Received semiannual interest of $1.5 million from the Kansas Abstractors bonds.Purchased 10% bonds of Holistic Entertainment Enterprises at their $18 million face value, to beheld until they mature in 2034. Semiannual interest is payable April 30 and October 31.Sold the Kansas Abstractors bonds for $28 million because rising interest rates are expected to cause their fair value to continue to fall. Nounrealized gains and losses had been recorded on these bonds previously.Purchased 12% bonds of Household Plastics Corporation at their $60 million face value, to be held until they mature in 2034. Semiannualinterest is payable May 31 and November 30.Purchased U.S. Treasury bonds for $5.6 million as trading securities, hoping to earn profits on shortterm differences in prices.Purchased 4 million shares of NXS Corporation's 50 million shares of common stock for $44 million, planning to hold these shares untilmarket conditions encourage their sale.Sold the Treasury bonds for $5.7 million.Received cash dividends of $3 million from the Millwork Ventures Company shares of common stock.Recorded any necessary adjusting entries relating to the investments. The market price of the Millwork Ventures Company common stockwas $27.50 per share and $11.50 per share for the NXS Corporation common stock. The fair values of the bond investments were $58.7million for Household Plastics Corporation and $16.7 million for Holistic Entertainment Enterprises.Sold the NXS Corporation common stock shares for $43.3 million.Required:Prepare the appropriate journal entry for each transaction or event. Use one summary entry on December 31 to adjust the portfolio of equityinvestments to fair value.

Investment means an asset purchased in expectation of earning a return on such investment in future…

Answered: Amalgamated General Corporation is a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2024, Rupar Retallers purchased $100,000 of Anand Company bonds at a discount of $6,000. The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. Rupar accounts for the bonds as a held-to-maturity Investment, and uses the effective interest method. In Rupar's December 31, 2024, journal entry to record the second period of Interest, Rupar would record a credit to interest revenue of Multiple Choice O O $3,000 $3,500 $1.300
ANSWER?
On January 1, 2021, Rupar Retailers purchased $130,000 of Anand Company bonds at a discount of $9,000. The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. Rupar accounts for the bonds as a held-to-maturity investment, and uses the effective interest method. In Rupar's December 31, 2021, journal entry to record the second period of interest, Rupar would record a credit to interest revenue of: Multiple Choice $4,235. $4,247. $4,550. $3,900.
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Company X purchased trading securities in February. Company Y purchased available-for-sale securities in February as well, and it plans to sell them before December. Company Z purchased available-for-sale securities and is planning to hold onto them for at least two years. What is implied here? 1. Company X and Company Y will report their securities under current assets on the balance sheet, while Company Z will report their securities immediately below current assets in the investments section. 2. Company X will report their securities under current assets on the balance sheet, while Company Y and Company Z will report their securities immediately under current assets in the investments section. 3. Company X and Company Y will report their securities under current assets, while Company Z will report their securities under current liabilities. 4. Company X, Y, and Z will all report their securities under current assets on the balance sheet.
Mead Incorporated began operations in Year 1. Following is a series of transactions and events involving its long-term debt investments in available-for-sale securities. Year 1 January 20 Purchased Johnson & Johnson bonds for $20,500. February 9 Purchased Sony notes for $55,440. June 12 Purchased Mattel bonds for $40,500. December 31 Fair values for debt in the portfolio are Johnson & Johnson, $21,500; Sony, $52,500; and Mattel, $46,350. Year 2 Sold all of the Johnson & Johnson bonds for $23,500. Sold all of the Mattel bonds for $35,850. April 15 July 5 July 22 August 19 Purchased Sara Lee notes for $13,500. Purchased Kodak bonds for $15,300. December 31 Fair values for debt in the portfolio are Kodak, $17,325; Sara Lee, $12,000; and Sony, $60,000. Year 3 February 27 Purchased Microsoft bonds for $160,800. June 21 Sold all of the Sony notes for $57,600. June 30 Purchased Black & Decker bonds for $50,400. August 3 Sold all of the Sara Lee notes for $9,750. November 1 Sold all of the…
On December 12, 2024, an Investment in equity securities costing $84,000 was sold for $108,000. The total of the sale proceeds was credited to the Investment in equity securities account Required: 1. Prepare the Journal entry to correct the error, assuming it is discovered before the books are adjusted or closed in 2024. (Ignore Income taxes.) 2. Prepare the journal entry to correct the error assuming It is not discovered until early 2025. (Ignore income taxes.)
Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable debt securities classified as available-for-sale securities. Assume that these transactions occur in 2016 (before the new rules for securities went into effect).a. Loudder Inc. purchases 5,000 bonds with a face value of $1,000 per bond. The bonds are purchased at par for cash and pay interest at a semi-annual rate of 4%.b. Loudder receives semi-annual cash interest of $200,000.c. Year-end fair value of the bonds is $978 per bond.d. Shortly after year-end, Loudder sells all 5,000 bonds for $970 per bond.Use negative signs with answers, if appropriate.
At December 31, 2024, Hull-Meyers Corporation had the following Investments that were purchased during 2024, its first year of operations: Trading Securities: Security A Security B Totals Securities Available-for-Sale: Security C Security D Totals Securities to Be Held-to-Maturity: Security E Security F Totals Trading Securities Security A Security B Securities Available-for-Sale Security C Security D Securities to be Held-to-Maturity Security E Security F Required: Complete the following table. Note: Amounts to be deducted should be indicated with a minus sign. Totals Amortized cost Reported on Balance Sheet as: No Investments were sold during 2024. All securities except Security D and Security F are considered short-term Investments. None of the fair value changes is considered permanent. Current assets Noncurrent assets $ 0 $ $ 965,000 170,000 $ 1,135,000 $ 765,000 965,000 $ 1,730,000 0 $ 555,000 680,000 $ 1,235,000 Net Income $ Fair Value $ 979,500 164, 600 $ 1,144,100 0 $ 838,500…

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