Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2024, with
Question:
Colah Company purchased $1 million of Jackson, Inc., 5% bonds at par on July 1, 2024, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale investment. At December 31, 2024, the Jackson bonds had a fair value of $1.2 million. Colah sold the Jackson bonds on July 1, 2025 for $900,000.
Required:
1. Prepare Colah’s journal entries to record
a. The purchase of the Jackson bonds on July 1.
b. Interest revenue for the last half of 2024.
c. Any year-end 2024 adjusting entries.
d. Interest revenue for the first half of 2025.
e. Any entries necessary upon sale of the Jackson bonds on July 1, 2025, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.
2. Fill out the following table to show the effect of the Jackson bonds on Colah’s net income, other comprehensive income, and comprehensive income for 2024, 2025, and cumulatively over 2024 and 2025.
Step by Step Answer:
Solution 1 The journal entries are as follows i Purchase of bo...View the full answer
