The following transactions relate to Portland Cement Ltd.s investment in the debt securities of Widget Makers Inc.

Question:

The following transactions relate to Portland Cement Ltd.’s investment in the debt securities of Widget Makers Inc. during 2021 and 2022. Portland is a public company and purchased the investment to earn interest income.

2021

Jan. 1 Purchased $120,000 of Widget Makers Inc. eight-year, 7% bonds for $135,666, to yield a market interest rate of 5%. Interest is payable semi-annually on July 1 and January 1.

July 1 Received semi-annual interest on Widget Makers’ bonds.

Dec. 31 Accrued interest at Portland’s year end.

2022

Jan. 1 Recorded receipt of interest payment from bonds.

July 1 Recorded receipt of interest payment from bonds.

2 Sold the bonds on the open market for $131,000.


Instructions

a. Record the above transactions. (Round all amounts to the nearest dollar.)

b. What is the balance in the investment asset account on December 31, 2021?

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Related Book For  book-img-for-question

Accounting Principles Volume 2

ISBN: 978-1119502555

8th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

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