Journal is the primary record of the business transaction in chronological (date wise) order. Journal Entry contains two effects one is debit and other is credit, under double entry book keeping system.
Available for sale security:
These securities are different from the held to maturity security. It includes the debt and equity securities. The main reason to purchase this security is to earn interest and dividend on investment.
Adjusting entries are made at the end of the year to adjust the financial position of the enterprise according to accrual basis of accounting.
1.
To prepare: Journal entries to record the transactions of year 2017.
2.
To prepare: Journal entries to record the transactions of year 2017.
To explain: The part 2 entry reported under the financial statement.
To prepare: Journal entries to record the transactions of year 2018.
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FINANCIAL ACCT.FUND.(LOOSELEAF)
- Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.arrow_forwardRefer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.arrow_forwardTransfer between Categories On December 31, 2018, Leslie Company held an investment in bonds of Kaufmann Company which it categorized as being held to maturity. At that time, the 8%, 100,000 face value bonds had a carrying value of 107,023.56 and were being amortized using the effective interest method based on a market rate of 7%. Interest on these bonds is paid annually each December 31. On December 31, 2019, after recording the interest earned, Leslie decided to reclassify the Kaufmann bonds to its available-for-sale category in anticipation of a major restructuring. At that time, the ending quoted market price for the bonds was 105,000. Required: Prepare the journal entries on December 31, 2019, to record the interest earned and the reclassification.arrow_forward
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- 1. Debt Investment Transactions, Available-for-Sale Valuation Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31: Year 1 Apr. 1. Purchased $66,000 of Smoke Bay 7%, 10-year bonds at their face amount plus accrued interest of $770. The bonds pay interest semiannually on February 1 and August 1. May 16. Purchased $112,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $280. The bonds pay interest semiannually on May 1 and November 1. Aug. 1. Received semiannual interest on the Smoke Bay bonds. Sept. 1. Sold $26,400 of Smoke Bay bonds at 104 plus accrued interest of $154. Nov. 1. Received semiannual interest on the Geotherma Co. bonds. Dec. 31 Accrued $924 interest on Smoke Bay bonds. Dec. 31 Accrued $560 interest on Geotherma Co. bonds. Year 2 Feb. 1.…arrow_forwardDebt 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?arrow_forwardRequirement: Carrying value of debt securities on 12/31/2010 at amortized cost using the effective interesr rate and the interest income to be reported for 2010 using the effective interest method.arrow_forward
- A1arrow_forwardRequirement 3. Prepare a comprehensive income statement for Thyme Investments for year ended December 31, 2018. Assume net income was $320,000. (Use a minus sign or parentheses to enter a loss.) 2018 Jan. 5 Purchased Vince Company's $525,000 bond at face value. Thyme classified the investment as available-for-sale. The Vince bond pays interest at the annual rate of 6% on June 30 and December 31 and matures on December 31, 2021 Management's intent is to keep the bonds for several years . June 30 Received an interest payment from Vince Dec.31 Received an interest payment from Vince. Dec.31 Adjusted the investment to its current market value of $518.500 .arrow_forwardDon't give answer in image formatarrow_forward
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