2. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of...

2. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of 8% bonds that pay interest on 1/1. They mature in 5 years and yield 10%. Max pays $9,242. On 12/31/20, the fair market value of the bonds is $11,000. Assuming the bonds are classified as "Trading", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit the closing journal entries.

3. Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of 8% bonds that pay interest on 1/1. They mature in 5 years and yield 10%. Max pays $9,242. On 12/31/20, the fair market value of the bonds is $11,000. Assuming the bonds are classified as "HTM", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit the closing journal entries.

4.Max's Company invests in the bonds issued by CarmCorp. On 1/1/20 Max buys $10,000 of 8% bonds that pay interest on 1/1. They mature in 5 years and yield 10%. Max pays $9,242. On 12/31/20, the fair market value of the bonds is $11,000. Assuming the bonds are classified as "AFS", prepare the journal entries for 1/1/20, 12/31/20, and 1/1/21. You may omit the closing journal entries.

Solutions

Expert Solution

Kindly round off as required since no instructions have been provided with the question regarding rounding off.

Date	General Journal	Debit	Credit
1/1/20	Trading investment	9242.00
	Cash		9242.00
	(To record purchase of bond investment)
12/31/20	Interest receivable ($10000 x 8%)	800.00
	Trading investment	124.20
	Interest revenue ($9242 x 10%)		924.20
	(To record accrual of interest)
12/31/20	Trading investment [$11000 - ($9242 + $124.20)]	1633.80
	Unrealized holding gain or loss-income		1633.80
	(To record trading investment at fair market value)
1/1/21	Cash	800.00
	Interest receivable		800.00
	(To record interest received on bond investment)

Date	General Journal	Debit	Credit
1/1/20	Held-to-maturity investment	9242.00
	Cash		9242.00
	(To record purchase of bond investment)
12/31/20	Interest receivable ($10000 x 8%)	800.00
	Held-to-maturity investment	124.20
	Interest revenue ($9242 x 10%)		924.20
	(To record accrual of interest)
1/1/21	Cash	800.00
	Interest receivable		800.00
	(To record interest received on bond investment)

Date	General Journal	Debit	Credit
1/1/20	Available-for-sale investment	9242.00
	Cash		9242.00
	(To record purchase of bond investment)
12/31/20	Interest receivable ($10000 x 8%)	800.00
	Available-for-sale investment	124.20
	Interest revenue ($9242 x 10%)		924.20
	(To record accrual of interest)
12/31/20	Available-for-sale investment [$11000 - ($9242 + $124.20)]	1633.80
	Unrealized holding gain or loss-equity		1633.80
	(To record AFS investment at fair market value)
1/1/21	Cash	800.00
	Interest receivable		800.00
	(To record interest received on bond investment)

ekkarill92 answered 1 year ago

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