Chapter 16, Problem 16.8E

Debt and Equity Investments, Available-for-Sale Debt and Equity with Fair Values Readily Determinable. Greenburg Company reported the following investment activity occurring at January 1 of the current year. Greenburg does not have significant influence over the investees.

Description	Amount Paid	Portfolio
Investment in bonds ($5,600,000 par value, 7% coupon, annual interest paid on December 31, 15 years to maturity, 9% effective yield)	$4,697,203	Held to maturity
Investment in publicly traded common stock (100,000 shares. $33 per share acquisition price)	3,300,000
Investment in publicly traded preferred stock (75,000 shares, $10 par, $10,000 annual dividend, $18 per share acquisition price)	450,000

Required

1. a. Prepare the journal entry required to record the acquisition of the investments at the beginning of the current year.
2. b. Prepare the journal entries to record interest and dividend income at year-end assuming that Greenburg receives the dividends on the preferred shares.
3. c. Prepare the journal entries required to adjust the carrying amount of the investments to their fair values at the end of the first year: bonds. $4,595,425; common stock. $38 per share, and preferred stock, $12 per share.