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1. Precision Castparts builds sophisticated machinery for the aerospace industry and frequently invests excess cash in...

1. Precision Castparts builds sophisticated machinery for the aerospace industry and frequently invests excess cash in corporate bonds, which it holds to maturity.  The following transactions relate to Precision’s bond investments during 2019. Precision has the positive ability and intent to hold all bonds until maturity, and their year-end is December 31.

      Apr. 30th:  Purchased $16 million of 5% Marmon Corp. bonds at face value.

      June 30th:  Received the $400,000 semiannual interest payment on the Marmon bonds.

      Oct. 1st: Purchased $10 million of 4% General Rebonds at face value.  These bonds pay interest on July 1st and January 1st of each year.

      Dec. 1st:  Sold the Marmon bonds for $16.5 million.

      Dec. 31st: Prepare any necessary adjusting entries.  The fair value of General Rebonds was $10.2 million.  Remember to accrue interest.

  1. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end.
  2. Indicate amounts that Precision will show on its 2019 Income Statement, Statement of Comprehensive Income, and Balance Sheet
    1. Income Statement
    2. Statement of Comprehensive Income
    3. Balance Sheet
  1. 2. Use the same data as Problem 1, but now assume the bonds are classified as Trading Securities.
    1. Prepare the appropriate journal entry for each transaction above, as well as any adjusting journal entries necessary at year-end
  1. Indicate amounts that Precision will show on its 2019 Income Statement, Statement of Comprehensive Income, and Balance Sheet
    1. Income Statement
  1. Statement of Comprehensive Income
  1. Balance Sheet

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ekkarill92 answered 2 years ago
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