The following information relates to the debt investments to Mayor Company on 2020. 1. On January...

The following information relates to the debt investments to Mayor Company on 2020.

1. On January 1, Purchased 100, $1,000 Mirror Corp. 10% bonds for $100,000 (at 100). Interest is payable on July 1 and January 1.

2. On April 1, Purchased 80, $1,000 Bondi Inc 9% bonds for $80,000 (at 100). Interest is payable on April 1 and October 1.

3. On July 1, semiannual interest is received.

4. On October 1, semiannual interest is received.

5. On October 1, Sold 30 Bondi Inc. bonds for $34,000 after receiving the interest due.

6. On December 31, accrued semiannual interest on Mirror Corp. and Bondi Inc bonds.

7. On December 31, the fair value of Mirror Corp. and Bondi Inc bonds are 102 and 101, respectively (102 means fair value=102% of par value). Mayor Company doesn’t have debt investment before 2020.

Instructions

(a) Prepare any journal entries you consider necessary, including year end entries (December 31), assuming these investments are managed to profit from changes in market interest rates (held for trading). Mayor Company doesn’t have debt investment before 2020.

(b) Prepare a partial statement of financial position showing the Investment account at December 31, 2020.

(c) If Mayor Company purchase the debt investment to collect the contractual cash flow (held the debt investment to maturity), explain how the journal entries would differ from those in part (a).

Expert Solution

ekkarill92 answered 2 years ago

PROBLEM 1 The following information relates to the debt investments to Mayor Company on 2020. On...

PROBLEM 1 The following information relates to the debt investments to Mayor Company on 2020. On January 1, Purchased 100, $1,000 Mirror Corp. 10% bonds for $100,000 (at 100). Interest is payable on July 1 and January 1. On April 1, Purchased 80, $1,000 Bondi Inc 9% bonds for $80,000 (at 100). Interest is payable on April 1 and October 1. On July 1, semiannual interest is received. On October 1, semiannual interest is received. On October 1, Sold 30...

The following information relates to the equity investments to Benji Company on 2020. On January 1,...

The following information relates to the equity investments to Benji Company on 2020. On January 1, Benji acquires 50,000 ordinary shares (represent 30% ownership) of Coconut Plc for $130,000. On May 1, Benji purchased 2,000 shares (less than 10% ownership) of Dodo Co. at $18 per share. On June 1, Benji purchased 3,000 shares (less than 10% ownership) of Denver Co. at $15 per share On July 1, Benji sold 500 shares of Dodo for $19 per share. On September...

The following information relates to the debt securities investments of Larkspur Company. 1. On February 1,...

The following information relates to the debt securities investments of Larkspur Company. 1. On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $309,600 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 8% bonds of Sampson, Inc. were purchased. These bonds with a par value of $180,000 were purchased at 100 plus accrued interest. Interest dates are...

The following information relates to the debt securities investments of Kingbird Company. 1. On February 1,...

The following information relates to the debt securities investments of Kingbird Company. 1. On February 1, the company purchased 11% bonds of Gibbons Co. having a par value of $310,800 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 8% bonds of Sampson, Inc. were purchased. These bonds with a par value of $192,000 were purchased at 100 plus accrued interest. Interest dates are...

1.The following information relates to the debt investments of Black Elk Petroleum Company: On February 1,...

1.The following information relates to the debt investments of Black Elk Petroleum Company: On February 1, the company purchased 10% bonds of Gerber Co. having a par value of $300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1. On April 1, semiannual interest is received. On July 1, 9% bonds of Target, Inc. were purchased. The bonds have a par value of $200,000 and were purchased at 100 plus accrued interest. Interest dates are June...

Problem 17-7 The following information relates to the debt securities investments of Carla Company. 1. On...

Problem 17-7 The following information relates to the debt securities investments of Carla Company. 1. On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $322,800 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of $201,600 were purchased at 100 plus accrued interest. Interest...

Problem 17-7 The following information relates to the debt securities investments of Ivanhoe Company. 1. On...

Problem 17-7 The following information relates to the debt securities investments of Ivanhoe Company. 1. On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of $313,200 at 100 plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semiannual interest is received. 3. On July 1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of $216,000 were purchased at 100 plus accrued interest. Interest...

The following information relates to the HTM debt securities investments of Kiran Company during 2016. a....

The following information relates to the HTM debt securities investments of Kiran Company during 2016. a. January 1: The company purchased 8% bonds of Tempe Co. having a par value of $240,000 at 99 plus accrued interest. Interest is payable May 1 and November 1. Maturity date is 11/1/17. b. May 1: Semiannual interest is received and amortization is updated. c. July 1: 10% bonds of Flagstaff were purchased. The bonds had a par value of $75,000 and were purchased...

The following information relates to the HTM debt securities investments of Kiran Company during 2018: a. ...

The following information relates to the HTM debt securities investments of Kiran Company during 2018: a. February 1: The company purchased 10% bonds of Tempe Co. having a par value of $150,000 at 97 plus accrued interest. Interest is payable on March 1 and September 1. Maturity date is 9/1/19 b. March 1: Semiannual interest is received and amortization is updated. c. June 1: 9% bonds of Flagstaff were purchased. The bonds had a par value of $80,000 and were...

The following information relates to the debt investments of Sarasota Inc. during a recent year: 1....

The following information relates to the debt investments of Sarasota Inc. during a recent year: 1. On February 1, the company purchased Gibbons Corp. 10% bonds with a face value of $324,000 at 100 plus accrued interest. Interest is payable on April 1 and October 1. 2. On April 1, semi-annual interest was received on the Gibbons bonds. 3. On June 15, Sampson Inc. 9% bonds were purchased. The $216,000 par-value bonds were purchased at 100 plus accrued interest. Interest...

Question