Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Feb. 1, 2020 Sharapova Company common stock, $100 par, 200 shares $ 37,400 April 1 U.S. government bonds, 11%, due April 1, 2030, interest payableApril 1 and October 1, 110 bonds of $1,000 par each 110,000 July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2020,purchased at 104 plus accrued interest, interest payableannually on March 1, due March 1, 2040 54,000 Instructions (Round all computations to the nearest dollar.) a. Prepare entries necessary to classify the amounts into proper accounts, assuming that the debt securities are classified as available-for-sale. b. Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2020, using the straight-line method. c. The fair values of the investments on December 31, 2020, were: Sharapova Company common stock $ 31,800 U.S. government bonds 124,700 McGrath Company bonds 58,600 What entry or entries, if any, would you recommend be made? d. The U.S. government bonds were sold on July 1, 2021, for $119,200 plus accrued interest. Give the proper entry.
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Feb. 1, 2020 Sharapova Company common stock, $100 par, 200 shares $ 37,400 April 1 U.S. government bonds, 11%, due April 1, 2030, interest payableApril 1 and October 1, 110 bonds of $1,000 par each 110,000 July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2020,purchased at 104 plus accrued interest, interest payableannually on March 1, due March 1, 2040 54,000 Instructions (Round all computations to the nearest dollar.) a. Prepare entries necessary to classify the amounts into proper accounts, assuming that the debt securities are classified as available-for-sale. b. Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2020, using the straight-line method. c. The fair values of the investments on December 31, 2020, were: Sharapova Company common stock $ 31,800 U.S. government bonds 124,700 McGrath Company bonds 58,600 What entry or entries, if any, would you recommend be made? d. The U.S. government bonds were sold on July 1, 2021, for $119,200 plus accrued interest. Give the proper entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.
| Feb. 1, 2020 | Sharapova Company common stock, $100 par, 200 shares | $ 37,400 |
| April 1 | U.S. government bonds, 11%, due April 1, 2030, interest payable April 1 and October 1, 110 bonds of $1,000 par each |
110,000 |
| July 1 | McGrath Company 12% bonds, par $50,000, dated March 1, 2020, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2040 |
54,000 |
Instructions
(Round all computations to the nearest dollar.)
a. Prepare entries necessary to classify the amounts into proper accounts, assuming that the debt securities are classified as available-for-sale.
b. Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2020, using the straight-line method.
c. The fair values of the investments on December 31, 2020, were:
| Sharapova Company common stock | $ 31,800 |
| U.S. government bonds | 124,700 |
| McGrath Company bonds | 58,600 |
What entry or entries, if any, would you recommend be made?
d. The U.S. government bonds were sold on July 1, 2021, for $119,200 plus accrued interest. Give the proper entry.
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