Powerpuff Corp. carries an account in its general ledger called Investments, which contained the following debits for investment purchases and no credits

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

(b) Prepare the entry to record the accrued interest on December 31, 2007.

The fair values of the securities on December 31, 2007, were:
Use a computer spreadsheet to prepare a schedule indicating any fair value adjustment needed at December 31, 2007.

Now assume Powerpuff’s investment in Blossom Company represents 30% of Blossom’s shares. In 2007, Blossom declared and paid dividends of $9,000 (on September 30) and reported net income of $30,000.
Prepare a brief memorandum explaining how the accounting for the Blossom investment will change, and discuss the impact on the financial statements of Powerpuff Corp.

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Feb. 1, 2007 April 1 July 1 Blossom Company common stock, $100 par, 200 shares U.S. Government bonds, 11%, due April 1, 2017, interest payable April 1 and October 1, 100 bonds of $1,000 par each Buttercup Company 12% bonds, par $50,000, dated March 1, 2007, purchased at par plus accrued interest, interest payable annually on March 1, due March 1, 2027 $ 37,400 100,000 52,000