Question

2017
Jan.	1		Purchased for $406,894 a 6%, $400,000 Jarvis Corp. bond that matures in five years when the market interest rate was 5.6%. Interest is paid semiannually beginning June 30, 2017. George’s Inc. plans to hold this investment until maturity.
Mar.	1		Bought 6,000 shares of Medley Corp., paying $32.50 per share.
May	7		Received dividends of $0.90 per share on the Medley Corp. shares.
June	1		Paid $316,000 for 21,000 shares of Zhang common shares.
June	30		Received interest on the Jarvis bond.
Aug.	1		Sold the Medley Corp. shares for $32.75 per share.
Dec.	31		Received interest on the Jarvis bond.
Dec.	31		The fair value of the Zhang shares on this date was $14.80 per share. Assume the fair value of the bonds equalled the carrying value.
2018
Jan.	14		Sold the Zhang shares for $14.60.

Required:
1. Prepare an amortization schedule for the Jarvis bond showing only 2017 and 2018. (Enter all the amounts as positive values. Do not round intermediate calculation. Round your final answers to the nearest whole dollar amount.)



2. Prepare the entries to record the transactions described above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)



3. Show how the investments would be reported on George’s December 31, 2017, balance sheet. (Do not round intermediate calculation. Round your final answers to the nearest whole dollar amount.)

References

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Answer 1

1) Amortisation schedule for 2017 & 2018:
Period	Cash Interest	Interest Rev.	Amortised Prem.	Carrying value
1-Jan-17				406894
30-Jun-17	12000	11393	607	406287	(400000*6%*0.5)
31-Dec-17	12000	11376	624	405663
30-Jun-18	12000	11359	641	405022
31-Dec-18	12000	11341	659	404362
2) Journal Entries:
Date	Acc titles	Debit $	Credit $
1-Jan-17	Bond receivable	400000
	Premium on Bond receivable	6894
	Cash		406894
	(bond purchased on premium)
1-Mar	Investment in Medley	195000		6000*32.5
	Cash		195000
	(investment in 6000 shares of Medley made @ 32.5)
7-May	Cash	5400
	Dividend revenue		5400
	(dividend received from medley)
1-Jun	Investment in Zhang	316000
	Cash		316000
	(investment in 21000 shares of Zhang)
30-Jun	Cash	12000
	Interest revenue		11393
	Premium on Bond receivable		607
	(being interest received on bond and prem. Amortised)
1-Aug	Cash	196500
	Investment in Medley		195000
	Gain on sale		1500
	(sale of 6000 shares of medley shares @ 32.75)
31-Dec	Cash	12000
	Interest revenue		11376
	Premium on Bond receivable		624
	(being interest received on bond and prem. Amortised)
31-Dec	Unrealised Loss	5200		(316000 - 21000*14.8)
	Investment in Zhang		5200
	(loss recorded on fair value of Zhang 21000 shares @ 14.8)
14-Jan-18	Cash	306600		21000*14.6
	Loss on Sale of shares	9400
	Investment in Zhang		310800	21000*14.8
	Unrealised Loss		5200
	(sale of 21000 shares of Zhang shares @ 14.6)
3) Partial Balance Sheet on Dec 31, 2017:
Assets:
Investment:
Bonds receivable	400000
add: Premium on Bond receivable	5663
Investment in Zhang	310800