During the current year, Reed Consulting acquired long-term available-for-sale debt securities on July 1 at a $70,000 cost. At its December 31 year-end, these securities had a fair value of $58,000. This is the first and only time the company purchased such ecurities. 1. Prepare the July 1 entry to record the purchase of these debt securities. 2. Prepare the year-end adjusting entry related to these securition

During the current year, Reed Consulting acquired long-term available-for-sale debt securities on July 1 at a $70,000 cost. At its December 31 year-end, these securities had a fair value of $58,000. This is the first and only time the company purchased such ecurities. 1. Prepare the July 1 entry to record the purchase of these debt securities. 2. Prepare the year-end adjusting entry related to these securition

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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Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31: Year 1 Apr. 1. Purchased $54,000 of Smoke Bay 4%, 10-year bonds at their face amount plus accrued interest of $360. The bonds pay interest semiannually on February 1 and August 1. May 16. Purchased $132,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $330. The bonds pay interest semiannually on May 1 and November 1. Aug. 1. Received semiannual interest on the Smoke Bay bonds. Sept. 1. Sold $21,600 of Smoke Bay bonds at 103 plus accrued interest of $72. Nov. 1. Received semiannual interest on the Geotherma Co. bonds. Dec. 31 Accrued $432 interest on Smoke Bay bonds. Dec. 31 Accrued $660 interest on Geotherma Co. bonds. Year 2 Feb. 1. Received semiannual interest on the Smoke Bay…
9
Presented below is selected information related to the financial instruments of Novak Company at December 31, 2025. This is Novak Company's first year of operations. Carrying Amount Fair Value (at December 31) Investment in debt securities (intent is to hold to maturity) $42,600 $43,500 Investment in Chen Company stock 737,000 856,500 Bonds payable 241,500 217,100 (a) Novak elects to use the fair value option for these investments. Assuming that Novak's net income is $108,000 in 2025 before reporting any securities gains or losses, determine Novak's net income for 2025. Assume that the difference between the carrying value and fair value is due to credit deterioration. Novak's net income for 2025 $ 228,400 (b) Record the journal entry, if any, necessary at December 31, 2025, to record the fair value option for the bonds payable. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is…
Berkshire Co. purchases debt investments in trading securities at a cost of $130 on July 1. (This is its first and only purchase of trading securities.) On December 30, Berkshire received $1 of interest from its trading securities. At year-end December 31, the trading securities had a fair value of $140. a. Prepare the July 1 purchase entry of trading securities. b. Prepare the December 30 entry for receipt of cash interest. c. Prepare the December 31 year-end adjusting entry for the trading securities’ portfolio. d. Explain how each account in entry c is reported in financial statements. e. Prepare the January 3 entry when a portion of its trading securities (that had cost $33) is sold for $36.
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Windsor Company has the following data at December 31, 2020 for its debt securities: Securities Cost Fair Value Available-for-sale $44,200 $50,700 Trading 59,800 54,600 Journalize the December 31 adjusting entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.) Date Account Titles and Explanation Dec. 31 Debit Credit Dec. 31 (To record fair value adjustment for available-for-sale investment) (To record fair value adjustment for trading investment)
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At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities (all of which were acquired at par value): Company Amortized Cost 12/31/18 Fair Value Cumulative Change in Fair Value Morgan Company $35,000 $34,200 $(800) Nance Company 50,000 53,100 3,100 Totals $85,000 $87,300 $2,300 During 2019, the following transactions occurred: July 1 Purchased Oscar Company debt securities with a par value of 100,000 for $98,000. The securities carry an annual interest rate of 10%, mature on December 31, 2021, and pay interest seminannually on July 1 and December 31. Terry uses the straight-line method to amortize any discounts or premiums. Oct. 11 Sold all of the Morgan Company securities for $33,000 plus interest of $1,300. Dec. 31 Received interest of $6,000 on the Nance Company and Oscar Company debt securities, and the following yearend total market values were available: Nance Company debt securities, $55,000; Oscar…
An investor company purchased $427,000 of 8% bonds from the investee company on January 1, 2020, with interest payable on December 31. The bonds were classified as Available-for-Sale. The bonds sold for $706,390. Using the effective-interest method, the investor company revised the Available-for-Sale Debt Securities account on December 31, 2020 and December 31, 2021 by the amortized discount/premium of $6,470. and $8,200, respectively. At December 31, 2020, the fair value of the investee company bonds was $912,000. At December 31, 2021, the fair value of the investee company bonds was $843,000. What is the amount of unrealized holding gain/loss related to this investment in 2021? (Very important: Just enter the amount. DO NOT put a plus or minus sign in front of the amount.)
On October 1, 2021, Best Company purchased as debt investments at fair value through profit or loss, P100,000, 14% bonds for 99 plus accrued interest and broker's fees. Interest is paid semi-annually on February 1 and August 1. What amount of interest revenue did Best Company report for the year ended Dec. 31, 2021
in the current year largo company purchased bonds on macdermont corporation with a cost of 125000 and a year end fair value of 127000 these are classified as long term available for sale debt securities prepare the journal entry to record any necessary fair value adjustment to the debt investments of december 31
In footnotes to its year-end annual report, Bancfirst Corp. reported that held-to-maturity debt securities with an amortized cost of $8,730 thousand had an estimated fair value of $8,806 thousand. The balance sheet reported: Select one: a. Held-to-maturity assets of $8,730 thousand b. Held-to-maturity assets of $8,806 thousand c. Accumulated other comprehensive income of $76 thousand related to held-to-maturity assets d. Both A and C e. Both B and C