Oso Company purchased a Costco bond for $40,000 on January 1, 2020 at face value with an interest rate of 3% paid and recorded annually on 12/31. Oso Company treats the bond as an available-for-sale investment. 1. On 12/31/20, Oso Company records ALL the entries related to this investment. The fair value of the bond is $45,000. Assume no entries have been recorded to date after the 1/1/20 purchase. Answer the following questions for Oso: a. How much is the investment valued at on Oso's balance sheet? Why is it valued at this amount? b. How much does Oso's net income change by for all entries recorded on 12/31/20 related to this bond? Include the amount and direction. If no change, write no change. 5 2. On 12/31/21, Oso Company records ALL the entries related to this investment. The fair value of the bond is $42,000. Assume no entries have been recorded since 12/31/20. Answer the following questions for Oso: a. Record the journal entry for any fair value adjustments that are needed. If no entry is needed, write no entry. b. How much does Oso's net income change (amount and direction) for the entry you recorded in a. 3. On 1/1/22, Oso Company sells the bond for $42,000. Record the journal entry for the sale AND note how much net income changes by from this entry.
Oso Company purchased a Costco bond for $40,000 on January 1, 2020 at face value with an interest rate of 3% paid and recorded annually on 12/31. Oso Company treats the bond as an available-for-sale investment. 1. On 12/31/20, Oso Company records ALL the entries related to this investment. The fair value of the bond is $45,000. Assume no entries have been recorded to date after the 1/1/20 purchase. Answer the following questions for Oso: a. How much is the investment valued at on Oso's balance sheet? Why is it valued at this amount? b. How much does Oso's net income change by for all entries recorded on 12/31/20 related to this bond? Include the amount and direction. If no change, write no change. 5 2. On 12/31/21, Oso Company records ALL the entries related to this investment. The fair value of the bond is $42,000. Assume no entries have been recorded since 12/31/20. Answer the following questions for Oso: a. Record the journal entry for any fair value adjustments that are needed. If no entry is needed, write no entry. b. How much does Oso's net income change (amount and direction) for the entry you recorded in a. 3. On 1/1/22, Oso Company sells the bond for $42,000. Record the journal entry for the sale AND note how much net income changes by from this entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oso Company purchased a Costco bond for $40,000 on January 1, 2020 at face value with an
interest rate of 3% paid and recorded annually on 12/31. Oso Company treats the bond as an
available-for-sale investment.
1. On 12/31/20, Oso Company records ALL the entries related to this investment. The fair value of
the bond is $45,000. Assume no entries have been recorded to date after the 1/1/20 purchase.
Answer the following questions for Oso:
a. How much is the investment valued at on Oso's balance sheet? Why is it valued at this
amount?
b. How much does Oso's net income change by for all entries recorded on 12/31/20 related to
this bond? Include the amount and direction. If no change, write no change.
2. On 12/31/21, Oso Company records ALL the entries related to this investment. The fair value of
the bond is $42,000. Assume no entries have been recorded since 12/31/20. Answer the following
questions for Oso:
a. Record the journal entry for any fair value adjustments that are needed. If no entry is needed,
write no entry.
b. How much does Oso's net income change (amount and direction) for the entry you recorded in
a.
3. On 1/1/22, Oso Company sells the bond for $42,000. Record the journal entry for the sale AND
note how much net income changes by from this entry.
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