(Available-for-Sale Investments) Octavio Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits (see page 894).

Instructions (Round all computations to the nearest dollar.)

(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.

(b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2006, using the straight-line method.

(c) The fair values of the securities on December 31, 2006, were:

What entry or entries, if any, would you recommend be made?

(d) The U.S. government bonds were sold on July 1, 2007, for $119,200 plus accrued interest. Give the proper entry.

Transcribed Image Text:

Feb. 1, 2006 April 1 July 1 Chiang Kai-Shek Company common stock, $100 par, 200 shares U.S. government bonds, 11%, due April 1, 2016, interest payable April 1 and October 1, 100 bonds of $1,000 par each Claude Monet Company 12% bonds, par $50,000, dated March 1, 2006 purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2026 $ 37,400 100,000 54,000