P17.7 (LO 1, 4) (Debt Investment Entries) The following information relates to the debt investments of Wildcat Welders. 1. On February 1, the company purchased 10% bonds of Gibbons plc having a par value of £300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of £200,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1. 4. On September 1, bonds with a par value of £60,00o, purchased on February 1, are sold at 99 plus accrued interest. 5. On October 1, semiannual interest is received. 6. On December 1, semiannual interest is received. 7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively. Instructions a. Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these investments are managed to profit from changes in market interest rates. b. Indicate how the journal entries would change if Wildcat classified the investments as held-for-collection and selling.
P17.7 (LO 1, 4) (Debt Investment Entries) The following information relates to the debt investments of Wildcat Welders. 1. On February 1, the company purchased 10% bonds of Gibbons plc having a par value of £300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of £200,000 were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1. 4. On September 1, bonds with a par value of £60,00o, purchased on February 1, are sold at 99 plus accrued interest. 5. On October 1, semiannual interest is received. 6. On December 1, semiannual interest is received. 7. On December 31, the fair value of the bonds purchased February 1 and July 1 are 95 and 93, respectively. Instructions a. Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these investments are managed to profit from changes in market interest rates. b. Indicate how the journal entries would change if Wildcat classified the investments as held-for-collection and selling.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
P17-7. Please answer part b,c,d.
Transcribed Image Text:P17.7 (LO 1, 4) (Debt Investment Entries) The following
information relates to the debt investments of Wildcat Welders.
1. On February 1, the company purchased 10% bonds of Gibbons ple
having a par value of £300,000 at 100 plus accrued interest.
Interest is payable April 1 and October 1.
2. On April 1, semiannual interest is received.
3. On July 1, 9% bonds of Sampson, Inc. were purchased. These
bonds with a par value of £200,000 were purchased at 100 plus
accrued interest. Interest dates are June 1 and December 1.
4. On September 1, bonds with a par value of £60,000, purchased on
February 1, are sold at 99 plus accrued interest.
5. On October 1, semiannual interest is received.
6. On December 1, semiannual interest is received.
7. On December 31, the fair value of the bonds purchased February 1
and July 1 are 95 and 93, respectively.
Instructions
a. Prepare any journal entries you consider necessary, including
year-end entries (December 31), assuming these investments are
managed to profit from changes in market interest rates.
b. Indicate how the journal entries would change if Wildcat
classified the investments as held-for-collection and selling.
c. If Wildcat classified these as held-for-collection investments,
explain how the journal entries would differ from those in part
(a).
d. Assume that Wildcat elects the fair value option for these
investments under the part (b) conditions. Briefly discuss how
the accounting would change.
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