January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds ovide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each ecember 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, lowing IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. uring 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was wngraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. onditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at ecember 31, 2024. ) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (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. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2; 35,2 1,9
January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds ovide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each ecember 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, lowing IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. uring 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was wngraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. onditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at ecember 31, 2024. ) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (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. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2; 35,2 1,9
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
15. answer part d2
Transcribed Image Text:On January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds
provide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each
December 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI,
following IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00.
During 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was
downgraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87.
Conditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at
December 31, 2024.
(b)
Your Answer Correct Answer (Used)
Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest
received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (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. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.)
Date
Jan. 1, 2021
Dec. 31, 2021
Account Titles and Explanation
FV-NI Investments
Cash
Cash
Investment Income or Loss
(To record collection of interest)
Investment Income or Loss
FV-NI Investments
(To record fair value adjustment)
Debit
316,289.83
35,280.00
1,989.83
Credit
316,2
35,2
1,9
Transcribed Image Text:Date Account Titles and Explanation
Dec. 31,
2022
Dec. 31,
2023
(d2)
Cash
Investment Income or Loss
Date
(To record collection of interest)
Dec. 31,
2024
Investment Income or Loss
FV-NI Investments
(To record fair value adjustment)
Cash
Investment Income or Loss
(To record interest income)
FV-NI Investments
eTextbook and Media
Investment Income or Loss
List of Accounts
(To record fair value adjustment)
Account Titles and Explanation
(To record collection of interest)
Debit
(To record fair value adjustment)
35280
Debit
62930
35280
4410
Credit
Prepare all entries required for 2024, including recognition of the recovery of the impairment in value, if necessary. (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. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.)
35280
62930
I
Credit
35280
4410
Attempts: 2 of 3 used
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