Question
In: Accounting
On March 17, 2020, Union Corporation purchased 500 bonds of AZQ as a long-term investment at...
On March 17, 2020, Union Corporation purchased 500 bonds of AZQ as a long-term investment at $400 per bond. On December 31, 2020, and December 31, 2021, the market value of the AZQ bonds is $420 and $430, respectively.
Required: (1.) What is the appropriate reporting category for this investment? Why? (2.) Prepare the adjusting entry on December 31, 2020. (3.) Prepare the adjusting entry on December 31, 2021.
Solutions
Expert Solution
1)Appropriate reporting category:
Since the investment is a long term investment and there is no information regarding how many years the company wants to hold it, this Investment is treated as a long term investment-"Available to sale" category.
2.Adjusting entry on December 31, 2020:
| Date | Account title | Debit($) | Credit($) |
|---|---|---|---|
| Dec 31,2020 | Investment in AZQ bonds | 10000 | |
|
Unrealized holding gain on investments [($420-400)×500bonds] |
10000 | ||
| (Since the bond value is appreciated at a price higher than the purchase price) |
3) Adjusting entry on Dec 31,2021:
| Date | Account title | Debit($) | Credit($) |
|---|---|---|---|
| Dec 31,2021 | Investment in AZQ bonds | 5000 | |
|
Unrealized gain on holding investment [($430-420)×500bonds] |
5000 | ||
| (Unrealized gain recognized since the last adjusted entry price.) |
ekkarill92 answered 2 years agoRelated Solutions
Q5. Scotch Company purchased as a long-term investment $775,000 of Kenton Corporation 10-year, 11% bonds. Present...
Q5. Scotch Company purchased as a long-term investment $775,000
of Kenton Corporation 10-year, 11% bonds. Present entries to record
the following selected transactions: Mar. 1Purchased bonds at their
face amount for $775,000. May 1Sold half the bonds at 98 plus
accrued interest of $6,925. The broker deducted $400 for brokerage
fees and taxes, remitting the balance.
On February 18, 2018, Union Corporation purchased $1,976,000 of IBM bonds. Union will hold the bonds...
On February 18, 2018, Union Corporation purchased $1,976,000 of
IBM bonds. Union will hold the bonds indefinitely, and may sell
them if their price increases sufficiently. On December 31, 2018,
and December 31, 2019, the market value of the bonds was $1,924,000
and $2,002,000, respectively.
Required:
2. & 3. Prepare the adjusting entry for
December 31, 2018 and 2019. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 130 million of 8% bonds, dated...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $ 130 million of 8% bonds, dated January 1, on January
1, 2018. Management intends to have the investment available for
sale when circumstances warrant. For bonds of similar risk and
maturity the market yield was 10%. The price paid for the bonds was
$115 million. Interest is received semiannually on June 30 and
December 31. Due to changing market conditions, the fair value of
the bonds at December 31, 2018,...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 180 million of 6% bonds, dated...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $ 180 million of 6% bonds, dated January 1, on January
1, 2018. Management intends to have the investment available for
sale when circumstances warrant. For bonds of similar risk and
maturity the market yield was 8%. The price paid for the bonds was
$160 million. Interest is received semiannually on June 30 and
December 31. Due to changing market conditions, the fair value of
the bonds at December 31, 2018,...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 140 million of 10% bonds, dated...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $ 140 million of 10% bonds, dated January 1, on January
1, 2018. Management intends to have the investment available for
sale when circumstances warrant. For bonds of similar risk and
maturity the market yield was 12%. The price paid for the bonds was
$124 million. Interest is received semiannually on June 30 and
December 31. Due to changing market conditions, the fair value of
the bonds at December 31, 2018,...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 80 million of 6% bonds, dated...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $ 80 million of 6% bonds, dated January 1, on January 1,
2018. Management intends to have the investment available for sale
when circumstances warrant. For bonds of similar risk and maturity
the market yield was 8%. The price paid for the bonds was $64
million. Interest is received semiannually on June 30 and December
31. Due to changing market conditions, the fair value of the bonds
at December 31, 2018,...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 6% bonds, dated January...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $80 million of 6% bonds, dated January 1, on January 1,
2018. Management has the positive intent and ability to hold the
bonds until maturity. For bonds of similar risk and maturity the
market yield was 8%. The price paid for the bonds was $64 million.
Interest is received semiannually on June 30 and December 31. Due
to changing market conditions, the fair value of the bonds at
December 31, 2018,...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $80 million of 8% bonds, dated January 1, on January 1,
2021. Management intends to have the investment available for sale
when circumstances warrant. For bonds of similar risk and maturity
the market yield was 10%. The price paid for the bonds was $66
million. Interest is received semiannually on June 30 and December
31. Due to changing market conditions, the fair value of the bonds
at December 31, 2021, was...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $70 million of 6% bonds, dated January...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $70 million of 6% bonds, dated January 1, on January 1,
2018. Management intends to have the investment available for sale
when circumstances warrant. When the company purchased the bonds,
management elected to account for them under the fair value option.
For bonds of similar risk and maturity the market yield was 8%. The
price paid for the bonds was $55 million. Interest is received
semiannually on June 30 and December...
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $110 million of 10% bonds, dated January...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $110 million of 10% bonds, dated January 1, on January
1, 2018. Management has the positive intent and ability to hold the
bonds until maturity. For bonds of similar risk and maturity the
market yield was 12%. The price paid for the bonds was $94 million.
Interest is received semiannually on June 30 and December 31. Due
to changing market conditions, the fair value of the bonds at
December 31, 2018,...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Question 7 8 Marks A company has 1,000,000 shares outstanding, and each share is currently worth...
- Who develops the technology? Who controls the technology (or does it control us)? Should there be...
- Sara Dorow researched the process by which Chinese infants are adopted by white American parents who...
- You are creating an enhanced entity-relationship model for a campus information system. A junior team member...
- Develop a 5 year operations strategic plan for the European organization.This should include recommendations for issues...
- A company has lower sales volume than expected and is operating at a loss. What can...
- Extend the HW principle to apply to three alleles/locus within a population (A, a, a’) Answer...
ADVERTISEMENT