Question

Kevin Company issues bonds on 1/1/20. Suppose, for Kevin Company (fiscal year end of 12/31), the carrying value of Kevin Company bonds at 12/31/20 and 12/31/21 are $106,461 and $105,073 respectively.

Please give the journal entries to mark to market at 12/31/20 and 12/31/21 and supporting calculations in each year for the following scenarios:

1: FMV at 12/31/20 = $107,500; FMV at 12/31/21 = $106,500

2: FMV at 12/31/20 = $107,500; FMV at 12/31/21 = $106,000

3: FMV at 12/31/20 = $107,500; FMV at 12/31/21 = $104,500

4: FMV at 12/31/20 = $105,500; FMV at 12/31/21 = $103,500

5: FMV at 12/31/20 = $105,500; FMV at 12/31/21 = $104,500

6: FMV at 12/31/20 = $105,500; FMV at 12/31/21 = $106,000

Answer 1

	Journal Entries
	Scenarios 1
	31-Dec-20	Unrealized loss on bonds	$1,039		31-Dec-21	Bonds payable	$1,000
		To Bonds payable	$1,039			To unrealized gain on bonds	$1,000
	Scenarios 2
	31-Dec-20	Unrealized loss on bonds	$1,039		31-Dec-21	Bonds payable	$1,500
		To Bonds payable	$1,039			To unrealized gain on bonds	$1,500
	Scenarios 3
	31-Dec-20	Unrealized loss on bonds	$1,039		31-Dec-21	Bonds payable	$3,000
		To Bonds payable	$1,039			To unrealized gain on bonds	$3,000
	Scenarios 4
	31-Dec-20	Bonds payable	$961		31-Dec-21	Bonds payable	$2,000
		To unrealized gain on bonds	$961			To unrealized gain on bonds	$2,000
	Scenarios 5
	31-Dec-20	Bonds payable	$961		31-Dec-21	Bonds payable	$1,000
		To unrealized gain on bonds	$961			To unrealized gain on bonds	$1,000
	Scenarios 6
	31-Dec-20	Bonds payable	$961		31-Dec-21	Unrealized loss on bonds	$500
		To unrealized gain on bonds	$961			To Bonds payable	$500
	MTM=Market to Market
	Workings
		31-Dec-20	31-Dec-21
		Carrying value	FMV	MTM loss(gain)	Carrying value*	FMV	MTM loss(gain)
	Scenarios 1	$106,461	$107,500	$1,039	$107,500	$106,500	($1,000)
	Scenarios 2	$106,461	$107,500	$1,039	$107,500	$106,000	($1,500)
	Scenarios 3	$106,461	$107,500	$1,039	$107,500	$104,500	($3,000)
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