Question

At the beginning of 2018, Baker Co. reported the following amounts related to investments:

                                               ASSETS                     

Interest receivable-Black Co. bonds                            20,000

Investment in Blue Co. common stock                  $320,000

Fair value adjustment                                                    (10,000)=$310,000

Investment in Red Co. common stock                       $700,000

Fair value adjustment $20,000= $720,000

Investment in Black Co., 8% bonds-AFS security       $600,000

Fair value adjustment                                                    30,000 = $630,000

Requirement 1: In the space below each item a-d (or on a t-account sheet), record Rockets 2018 transactions/events on the underlined date. Show any computations.

a. On January 31, 2018, received semi-annual interest payment of $24,000 on 8% Black Co. bonds purchased at the $600,000 face value on August 1, 2017. Baker recorded an adjusting entry for interest at the end of 2017.

b. On July 31, 2018, received semi-annual interest payment of $24,000 from Black Co.

c. On November 1, 2018, sold Red Co. common stock for $690,000.

.

d. On December 31, 2018, recorded any necessary adjusting entries related to investments. The following information is available:

Dec. 31, 2018 fair value

Bkue Co. common stock              $270,000

Blue Co. bonds                               674,000

What is net income?

What is comprehensive NI?

Answer 1

Note : There is printing error in the question. In the requirement d, it gives information abour Blue Co. bonds,
while we do not have Blue Co. Bonds in our investment portfolio. It is Black Co. bonds to which this information
is pertaining and solution is given after fixing the printing error
Date/S.N.	Account title & Explanation		Debit	Credit
			Amount in $	Amount in $
2018
Jan-31	Cash		24000
		Interest Receivable		20000
		Interest Income		4000
	To record the receipt of semiannual interest from Black Co. bonds
Jul-31	Cash		24000
		Interest Income		24000
	To record the receipt of semiannual interest from Black Co. bonds
Nov-01	Cash		690000
	Fair Value Adjustment (Other Comprehesive Income)		20000
	Realized loss on sale of Red co. Common stock(NI)		10000
		Investment in Red Co. Common Stock		720000
	To record the sale of Red. Co. common stock
Dec-31	Fair Value Adjustment (Other Comprehesive Income)		40000
		Investment in Blude Co. Common Stock		40000
	Investment in Black co. Bonds		44000
		Fair Value Adjustment (Other Comprehesive Income)		44000
	To record the fair value adjustment for Available for sale securities
Requirement
	Interest Income on Black Bonds received on January 31			4000
	Interest Income on Black Bonds received on July 31			24000
	Accured interest on Black bonds as on December 31,			20000
	Loss on sale of Red company common stock			-30000
		Net Income		18000
	Fair value adjustment	Less :Unrealized loss on Blue Company common stock		-40000
		Add : Unrealized gain on Black company bonds		44000
		Comprehensive Net income		22000