For the past three years, Sheridan Holdings Ltd. has held bonds as investments, which it accounted for using the amortized cost model. The bonds were purchased at a discount and are currently classified as Bond Investment at Amortized Cost. There have been no disposals of bonds since the purchase in early 2021. Due in part to Bonafacio's liquidity needs, and the recent market rate of interest increases, Sheridan has changed its plans concerning holding the bonds as fixed income. It now feels unwilling to wait for the bonds' maturity date to collect the proceeds from the maturity. Consequently, it was decided in December 2023 that the bonds should instead be accounted for as Fair Value-Net Income (FV-NI) Investments. Sheridan follows IFRS. The carrying amount and fair value of the investment portfolio of bonds appears below, along with the interest income recorded in the accounts: Year Ended December 31, 2023 2022 2021 Carrying amount at amortized cost $229,247 $225,725 $222,401 Fair value 226,800 224,800 224,000 Interest income for the year 13,522 13,324 13,134 Cash collected for interest during the year 10,000 10,000 10,000 (c) Prepare any necessary journal entry at December 31, 2023, assuming prior years' financial statements would need to be adjusted. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
For the past three years, Sheridan Holdings Ltd. has held bonds as investments, which it accounted for using the amortized cost model. The bonds were purchased at a discount and are currently classified as Bond Investment at Amortized Cost. There have been no disposals of bonds since the purchase in early 2021. Due in part to Bonafacio's liquidity needs, and the recent market rate of interest increases, Sheridan has changed its plans concerning holding the bonds as fixed income. It now feels unwilling to wait for the bonds' maturity date to collect the proceeds from the maturity. Consequently, it was decided in December 2023 that the bonds should instead be accounted for as Fair Value-Net Income (FV-NI) Investments. Sheridan follows IFRS. The carrying amount and fair value of the investment portfolio of bonds appears below, along with the interest income recorded in the accounts: Year Ended December 31, 2023 2022 2021 Carrying amount at amortized cost $229,247 $225,725 $222,401 Fair value 226,800 224,800 224,000 Interest income for the year 13,522 13,324 13,134 Cash collected for interest during the year 10,000 10,000 10,000 (c) Prepare any necessary journal entry at December 31, 2023, assuming prior years' financial statements would need to be adjusted. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For the past three years, Sheridan Holdings Ltd. has held bonds as investments, which it accounted for using the amortized cost model.
The bonds were purchased at a discount and are currently classified as Bond Investment at Amortized Cost. There have been no
disposals of bonds since the purchase in early 2021. Due in part to Bonafacio's liquidity needs, and the recent market rate of interest
increases, Sheridan has changed its plans concerning holding the bonds as fixed income. It now feels unwilling to wait for the bonds'
maturity date to collect the proceeds from the maturity. Consequently, it was decided in December 2023 that the bonds should
instead be accounted for as Fair Value-Net Income (FV-NI) Investments. Sheridan follows IFRS. The carrying amount and fair value of
the investment portfolio of bonds appears below, along with the interest income recorded in the accounts:
Year Ended December 31,
2023
2022
2021
Carrying amount at amortized cost
$229,247
$225,725
$222,401
Fair value
226,800
224,800
224,000
Interest income for the year
13,522
13,324
13,134
Cash collected for interest during the year
10,000
10,000
10,000
(c)
Prepare any necessary journal entry at December 31, 2023, assuming prior years' financial statements would need to be adjusted.
(List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Account Titles and Explanation
Debit
Credit
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