Debt investment transactions, available-for-sale valuationSoto Industries Inc. in an athletic foot ware company that beganoperations on January 1, Year 1. The following transactions relate to debtinvestments acquired by Solo Industries Inc., which has a fiscal yearending on December 31:Instructions1. Journalize the entries to record these transactions.2. If the bond portfolio is classified as available for sale, what impactwould this have on financial statement disclosure? Year1Purchased $100,000 of Welch Co. 6%, 15-year bonds at theirApr.face amount plus accrued interest of $500. The bonds pay1.interest semiannually on March 1 and September 1.Purchased $210,000 of Bailey 49%, 10-year bonds at their faceJuneamount plus accrued interest of $700. The bonds pay interest1.semiannually on May 1 and November 1.Sept.Received semiannual interest on the Welch Co. bonds.1.Sold $10,000 of Welch Co. bonds at 97 plus accrued interest of30.$200.Nov.Received semiannual interest on the Bailey bonds.1.Dec.Accrued $1,200 interest on the Welch Co. bonds.31.Accrued $1,400 interest on the Hailey bonds.31.Year2Mar.Received semiannual interest on the Welch Co. bonds.1.MayReceived semiannual interest on the Bailey bonds.1.

In accountancy, journal entries can be defined as the process of recording relevant business…

Answered: Year 1 Purchased $100,000 of Welch Co.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Debt investment transactions, available-for-sale valuation
Soto Industries Inc. in an athletic foot ware company that began
operations on January 1, Year 1. The following transactions relate to debt
investments acquired by Solo Industries Inc., which has a fiscal year
ending on December 31:

Instructions
1. Journalize the entries to record these transactions.
2. If the bond portfolio is classified as available for sale, what impact
would this have on financial statement disclosure?

Year
1
Purchased $100,000 of Welch Co. 6%, 15-year bonds at their
Apr.
face amount plus accrued interest of $500. The bonds pay
1.
interest semiannually on March 1 and September 1.
Purchased $210,000 of Bailey 49%, 10-year bonds at their face
June
amount plus accrued interest of $700. The bonds pay interest
1.
semiannually on May 1 and November 1.
Sept.
Received semiannual interest on the Welch Co. bonds.
1.
Sold $10,000 of Welch Co. bonds at 97 plus accrued interest of
30.
$200.
Nov.
Received semiannual interest on the Bailey bonds.
1.
Dec.
Accrued $1,200 interest on the Welch Co. bonds.
31.
Accrued $1,400 interest on the Hailey bonds.
31.
Year
2
Mar.
Received semiannual interest on the Welch Co. bonds.
1.
May
Received semiannual interest on the Bailey bonds.
1.

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