Question

Gaelic Industries Inc. is an athletic footware company that began operations on January 1, 2016. The following transactions relate to debt investments acquired by Gaelic Industries Inc., which has a fiscal year ending on December 31:

Record these transactions on page 10

2016
May	1	Purchased $75,000 of Avery Co. 7%, 15-year bonds at their face amount plus accrued interest of $875. The bonds pay interest semiannually on March 1 and September 1.
	16	Purchased $60,000 of Clawhammer 6%, 10-year bonds at their face amount plus accrued interest of $150. The bonds pay interest semiannually on May 1 and November 1.
Sept.	1	Received semiannual interest on the Avery Co. bonds.
	30	Sold $30,000 of Avery Co. bonds at 98 plus accrued interest of $175.
Nov.	1	Received semiannual interest on the Clawhammer bonds.
Dec.	31	Accrued $1,050 interest on the Avery Co. bonds.
	31	Accrued $600 interest on the Clawhammer bonds.

Record these transactions on page 11

2017
Mar.	1	Received semiannual interest on the Avery Co. bonds.
May	1	Received semiannual interest on the Clawhammer bonds.

Required:

1.

Journalize the entries to record these transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. In your computations, round per share amounts to two decimal places.

2.

If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure? 1. Journalize the entries to record the transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. In your computations, round per share amounts to two decimal places. All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback. PAGE 10PAGE 11 JOURNAL Score: 10/331 DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Adjusting Entries 18 19 20 21

Answer 1

The Journal entries would be as follows:

2016	Particulars/Description		Pst Ref	Dr. Amt $	Cr. Amt $
1-May	Investment in Bonds - Avery 7%	Dr.		75000
	Accrued Interest (2 month int)	Dr.		875
	Bank	Cr.			75875
16-May	Investment in Bonds - Clawhammer 6%	Dr.		60000
	Accrued Interest (0.5 mth int)	Dr.		150
	Bank	Cr.			60150
1-Sep	Bank	Dr.		2625
	Accrued Interest (2 month int)	Cr.			875
	Intrest on Bonds (4month int)	Cr.			1750
30-Sep	Bank (30000*98/100 + 175)	Dr.		29575
	Loss on Sale of Investment (30000*2/100)	Dr.		600
	Intrest on Bonds (1 month int)				175
	Investment in Bonds - Avery 7%				30000
2017
1-Nov	Bank	Dr.		1800
	Accrued Interest (0.5 month int)	Cr.			150
	Interest on Bonds (5.5 month int)	Cr.			1650
31-Dec	Accrued Intrest (Avery 1050 + Clawhammer 600)	Dr.		1650
	Interest on Bonds	Cr.			1650
1-Mar	Bank (6 month interest on $45000 at 7%)	Dr.		1575
	Accrued Interest (1050 at year end, 4 mth int)	Cr.			1050
	Intrest on Bonds (Bal fig, 2 mth interest)	Cr.			525
1-May	Bank (6 month interest on $60000 at 6%)	Dr.		1800
	Accrued Interest (600 at year end, 2 mth int)	Cr.			600
	Interest on Bonds (Bal fig, 4 mth int)	Cr.			1200

In case the bonds are held for sale then the bonds fair value has to be reported at the end of the each year in disclosure and the bonds have to be checked for any impairment.