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(a)
Sale of debt investment:Debt investments refer to the investments made in debts by the investor for which it lends funds to the borrowing company at a predetermined interest and the debt amount is repaid on the maturity date. For example, corporate bonds, government bonds, certificate of deposits.
Gain on sale of debt investments: If the sale proceeds from sale of debt investments exceed the cost price of the debt investments, there is a gain on sale of investments.
Loss on sale of debt investments: If the sale proceeds from sale of debt investments is less than the cost price of the debt investments, there is a loss on sale of investments.
To explain: the computation of gain or loss on sale of debt investments.
(b)
To explain: the presentation of gain or (loss) on sale of debts investments in the financial statements.
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Chapter AH Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
- General accountingarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forwardNonearrow_forward
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