In the current year, Wally Incorporated purchased debt investments of Olson Company with a cost of $11,400 and a year-end fair value of $14,000. This debt investment is classified as held-to-maturity and this is Wally Incorporated's first and only purchase of such securities. The journal entry to record any necessary fair value adjustment to this held-to-maturity debt security as of its December 31 year-end is:

In the current year, Wally Incorporated purchased debt investments of Olson Company with a cost of $11,400 and a year-end fair value of $14,000. This debt investment is classified as held-to-maturity and this is Wally Incorporated's first and only purchase of such securities. The journal entry to record any necessary fair value adjustment to this held-to-maturity debt security as of its December 31 year-end is:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On July 1 of the current year, West Company purchased for cash, 40, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 b. Record the entry for the purchase of the bonds by West Company on July 1. Date Account Name Debit Credit Jul. 1, Year 1 To record investment purchase. c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on that date was $415,000.…
Required information [The following information applies to the questions displayed below.] Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow. Trading Securities Tesla Bonds Nike Bonds Ford Bonds View transaction list
On January 1, 2020, Sage Company purchased $270,000, 6% bonds of Aguirre Co. for $248,099. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Sage Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Sage Company sold the bonds for $249,638 after receiving interest to meet its liquidity needs. (a) Prepare the journal entry to record the purchase of bonds on January 1. Assume that the bonds are classified as available-for-sale. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020
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 securities. 1. Prepare the July 1 entry to record the purchase of these debt securities. 2. Prepare the year-end adjusting entry related to these securities. View transaction list Journal entry worksheet 1 2 Record purchase of available-for-sale securities. Note: Enter debits before credits. Date July 01 General Journal Debit Credit
Req. 4: 1) Record the fair-value adjustment. 2) Record any reclassification adjustment. 3) Record the sale of the investment by Mills.
At the end of 2018, Hodge Company prepared the following schedule of investments in trading debt securities (all of which were acquired at par value): Company 12/31/2018 Book Value 12/31/2018 Fair Value Thompson Company $75,000 $74,200 Stevens Company 40,000 43,100 Totals $115,000 $117,300 During 2019, the following transactions occurred: July 1 Purchased Little Company debt securities for $100,000 (which is equal to par value). The securities carry an annual interest rate of 10%, mature on December 31, 2021, and pay interest seminannually on July 1 and December 31. Oct. 11 Sold all of the Thompson Company securities for $73,000 plus interest of $2,800. Dec. 31 Received interest of $5,000 on the Stevens Company and Little Company debt securities, and the following yearend total market values were available: Stevens Company debt securities, $45,000; Little Company debt securities, $98,000. Required: 1. Prepare journal entries to record the preceding information.…
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…
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale in years when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020. Mar. 31 Acquired 5% Distribution Transformers Corporation bonds costing $410,000 at face value. Sep. 1 Acquired $915,000 of American Instruments’ 8% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $436,000. Nov. 1 Purchased $1,410,000 of M&D Corporation 3% bonds at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:…
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…
Carla Vista Company purchased, on January 1, 2025, as an available-for-sale security, $73,000 of the 10%, 5-year bonds of Tri Town Corporation for $67,737, which provides an 12% return.Prepare Carla Vista’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $69,350. Assume effective-interest amortization is used. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 1,225.)
Required information [The following information applies to the questions displayed below.] Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow. Trading Securities Tesla Bonds Nike Bonds Cost Fair Value $ 15,600 24,800 6,200 $ 11,700 26,040 4,960 Ford Bonds Prepare the journal entry to record the December 31 year-end fair value adjustment for these debt securities. View transaction list Journal entry worksheet 1 Record the year-end adjustment to fair value, if any. Note: Enter debits before credits. Date General Journal Debit Credit December 31 Record entry Clear entry View general journal
In its first year of operations, Wildhorse Corporation purchased, available-for-sale debt securities costing $65.000 as a long-term investment. At December 31, 2022, the fair value of the securities is $60,500. Show the financial statement presentation of the securities and related accounts. Assume the securities are noncurrent. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45)) WILDHORSE CORPORATION Balance Sheet 4 $