Question
In: Accounting
LED Corporation owns $1,100,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The...
LED Corporation owns $1,100,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The market price of Branch’s bonds fell by $385,000, due to concerns about one of the company’s principal drugs. The concerns were justified when the FDA banned the drug. $121,000 of that decline in value already had been included in OCI as a temporary unrealized loss in a prior period. LED views $170,000 of the $385,000 loss as related to credit losses, and the other $215,000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. The assumption that LED Corporation used the AFS Credit Loss Model introduced in ASU 2016-13 and required after 2020.What journal entries should LED record to account for the decline in market value in the current period? How should the decline affect net income and comprehensive income?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Q18 Neuman classifies its investment in bonds as available-for-sale investment. The investment was purchased at a...
Q18 Neuman classifies its investment in bonds as
available-for-sale investment. The investment was purchased at a
discount. Which of the following associated account balance(s) must
reach zero by the maturity date?
Multiple Choice
Discount on Bonds Payable, OCI-unrealized gain or loss
Discount on Bonds Payable, fair value adjustment, OCI-unrealized
gain or loss
Discount on Bonds Payable
Discount on Bonds Payable, fair value adjustment
Majestic Company owns the following debt investment which management properly classifies as available for sale: &nbs
Majestic Company owns the following debt investment which
management properly classifies as available for sale:
Amortized
Cost
Fair Value at 12/31/19
Ajax Company
Bond
$1,670,000
$1,710,000
Majestic is preparing its adjusting entries for 2019 to record
the Ajax Bond at its fair value. At the end of 2018, the bond had
an amortized cost of $1,700,000 and a fair value of $1,680,000
leaving a credit balance in the Fair Value Adjustment account of
$20,000. (SHOW ALL WORK)
Required:
Prepare...
Some of Tollakson Corporation’s investment securities are classified as trading securities and some are classified as available-for-sale.
Some of Tollakson Corporation’s investment securities are classified as trading securities and some are classified as available-for-sale. The cost and fair value of each category at December 31, 2017, were as follows.
At December 31, 2016, the Fair Value Adjustment—Trading account had a debit balance of $3,200, and the Fair Value Adjustment—Available-for-Sale account had a credit balance of $5,750. Prepare the required journal entries for each group of securities for December 31, 2017.
Securities held-to-maturity, securities available for sale, and trading securities Amalgamated General Corporation is a consulting firm...
Securities held-to-maturity, securities available for sale, and
trading securities
Amalgamated General Corporation is a consulting firm that also
offers financial services through its credit division. From time to
time the company buys and sells securities intending to earn
profits on short-term differences in price. The following selected
transactions relate to Amalgamated’s investment activities during
the last quarter of 2016 and the first month of 2017. The only
securities held by Amalgamated at October 1 were $30 million of 10%
bonds...
Securities held-to-maturity, securities available for sale, and trading securities Amalgamated General Corporation is a consulting firm...
Securities held-to-maturity, securities available for sale, and
trading securities
Amalgamated General Corporation is a consulting firm that also
offers financial services through its credit division. From time to
time the company buys and sells securities intending to earn
profits on short-term differences in price. The following selected
transactions relate to Amalgamated’s investment activities during
the last quarter of 2016 and the first month of 2017. The only
securities held by Amalgamated at October 1 were $30 million of 10%
bonds...
S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2021, S&L...
S&L Financial buys and sells securities which it classifies
as available-for-sale. On December 27, 2021, S&L purchased
Coca-Cola bonds at par for $895,000 and sold the bonds on January
3, 2022, for $905,000. At December 31, the bonds had a fair value
of $887,000, and S&L has the intent and ability to hold the
investment until fair value recovers.
Prepare journal entries to record (a) any unrealized gains or
losses occurring in 2021 and (b) the sale of the bonds...
S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2021, S&L...
S&L Financial buys and sells securities which it classifies
as available-for-sale. On December 27, 2021, S&L purchased
Coca-Cola bonds at par for $887,000 and sold the bonds on January
3, 2022, for $896,000. At December 31, the bonds had a fair value
of $879,000, and S&L has the intent and ability to hold the
investment until fair value recovers.
Prepare journal entries to record (a) any unrealized gains or
losses occurring in 2021 and
(b) the sale of the bonds...
S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2018, S&L...
S&L Financial buys and sells securities which it classifies
as available-for-sale. On December 27, 2018, S&L purchased
Coca-Cola bonds at par for $892,000 and sold the bonds on January
3, 2019, for $900,000. At December 31, the bonds had a fair value
of $885,000, and S&L has the intent and ability to hold the
investment until fair value recovers. Prepare journal entries to
record (a) any unrealized gains or losses occurring in 2018 and (b)
the sale of the bonds...
S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2018, S&L...
S&L Financial buys and sells securities which it classifies
as available-for-sale. On December 27, 2018, S&L purchased
Coca-Cola bonds at par for $875,000 and sold the bonds on January
3, 2019, for $880,000. At December 31, the bonds had a fair value
of $873,000, and S&L has the intent and ability to hold the
investment until fair value recovers.
Prepare journal entries to record (a) any unrealized gains or
losses occurring in 2018 and (b) the sale of the bonds...
On December 31, 2018, Marsh Company held Xenon Company bonds in its portfolio of available-for-sale securities....
On December 31, 2018, Marsh Company held Xenon Company bonds in
its portfolio of available-for-sale securities. The bonds have a
par value of $14,000, carry a 10% annual interest rate, mature in
2025, and had originally been purchased at par. The market value of
the bonds at December 31, 2018 was $12,000. The December 31, 2018,
balance sheet showed the following:
Marsh Company
Partial Balance Sheet
December 31, 2018
1
Assets
2
Investment in Available-for-Sale Securities
$14,000.00
3
Less: Allowance...
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