Question

I'll rate do all parts

Debt Investment Transactions, Available-for-Sale Valuation

Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31:

Year 1
Apr. 1.	Purchased $36,000 of Smoke Bay 4%, 10-year bonds at their face amount plus accrued interest of $240. The bonds pay interest semiannually on February 1 and August 1.
May 16.	Purchased $130,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $325. The bonds pay interest semiannually on May 1 and November 1.
Aug. 1.	Received semiannual interest on the Smoke Bay bonds.
Sept. 1.	Sold $14,400 of Smoke Bay bonds at 103 plus accrued interest of $48.
Nov. 1.	Received semiannual interest on the Geotherma Co. bonds.
Dec. 31	Accrued $288 interest on Smoke Bay bonds.
Dec. 31	Accrued $650 interest on Geotherma Co. bonds.
Year 2
Feb. 1.	Received semiannual interest on the Smoke Bay bonds.
May 1.	Received semiannual interest on the Geotherma Co. bonds.

Required:

1. Journalize the entries to record these transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

Date	Description	Debit	Credit
Year 1
Apr. 1.
May 16.
Aug. 1.
Sept. 1.
Nov. 1.
Dec. 31 Smoke Bay
Dec. 31 Geotherma Co.
Year 2
Feb. 1.
May 1.

2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be adjusted to . This would be accomplished by using a valuation allowance account and account.

Answer 1

1. Journalize the entries to record these transactions?

Answer:

S.No	Particulars	Debit ($)	Credit ($)
1-4	7% Smoke Bay 10 Year Bonds a/c	78,000
	Interest Accrued a/c	910
	Bank a/c		78,910
16-5	6% Geotherma 12 Tear Bonds a/c	120,000
	Interest Accrued a/c	300
	Bank a/c		120,300
1-8	Bank a/c	2,730
	Interest Accrued a/c		910
	Interest a/c		1,820
1-9	Bank a/c	32,318
	7% Smoke Bay 10 Year Bonds a/c		31,200
	Interest a/c		182
	Capital Profit a/c		936
1-11	Bank a/c	3,600
	Interest Accrued a/c		300
	Interest a/c		3,300
31-12	Interest Accrued a/c	1,692
	Interest a/c		1,692
Year-2
1-2	Bank a/c	1,638
	Interest Accrued a/c		1,092
	Interest a/c		546
1-5	Bank a/c	3,600
	Interest Accrued a/c		600
	Interest a/c		3,000