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 required, select "No Entry" for the account titles and enter O for the amounts.)

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 required, select "No Entry" for the account titles and enter O for the amounts.)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 7RE: Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith...

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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
required, select "No Entry" for the account titles and enter O for the amounts.)
Date
Dec. 31, 2025
Account Titles and Explanation
Bonds Payable
Debit
24,400
Credit
Interest Revenue
24,400

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