On June 1, 2025, Caleb’s Restaurant decides to invest excess cash of $50,000 from the tourist season by purchasing a UAE, Inc. bond at face value. At year-end, December 31, 2025, UAE, Inc.’s bond had a fair value of $48,400. The investment is categorized as an available-for-sale debt investment and will be held for the short-term. 

Requirements 

1. Journalize the transactions for Caleb’s Restaurant’s investment in UAE, Inc. for 2025. 

2. In what category and at what value would Caleb’s Restaurant report the asset on the December 31, 2025, balance sheet? In what account would the market price change in UAE, Inc.’s stock be reported, if at all? 

3. What was the net effect of the investment on Caleb’s Restaurant’s net income for the year ended December 31, 2025?