Exercise 12-12 (Static) Available-for-sale securities (L012-1, 12-4) Colah Company purchased $1,000,000 of Jackson, Inc., 5% bonds at par on July 1, 2021, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale investment. At December 31, 2021, the Jackson bonds had a fair value of $1,200,000. Colah sold the Jackson bonds on July 1, 2022 for $900,000. Required: 1. Prepare Colah's journal entries for the following transactions: a. The purchase of the Jackson bonds on July 1. b. Interest revenue for the last half of 2021. c. Any year-end 2021 adjusting entries. d. Interest revenue for the first half of 2022. e. Any entries necessary upon sale of the Jackson bonds on July 1, 2022, including updating the fair-value adjustment, recording any reclassification adjustment and recording the sale. 2. Complete the following table to show the effect of the Jackson bonds on Colah's net income, other comprehensive income, and comprehensive income for 2021, 2022, and cumulatively over 2021 and 2022. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare Colah's Journal entries for above transactions. I no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in whole dollars, not in millions.) View transaction list x 1 Record the purchase of the Jackson bonds on July 1. > 2 Record the interest revenue for the last half of 2021. 3 Record the entry to adjust to fair value at year end. 4 Record the interest revenue for the first half of 2022. 5 Record the entry to adjust to fair value on the date of sale. Credit 6 Record the entry for reclassification adjustment. 7 Record the sale of the Jackson bonds on July 1, 2022. Note = journal entry has been entered Record entry Clear entry View general journal Required 1 Required 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 2021, 2022, and cumulatively over 2021 and 2022. (Negative amounts should be entered with minus sign. Enter your answers in whole dollars.) 2022 Total Net Income $ OCI $ Comprehensive Income 2021 $ 0 Required 1 Brief Exercise 12-17 (Static) HTM investments and impairment (Appendix 12B) [LO12-2, 12-8) LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities held to maturity. The market price of Branch's bonds fell by $450,000, due to concerns about one of the company's principal drugs. The concerns were justified when the FDA banned the drug. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250,000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for any credit or noncredit losses in the current period? How should the decline affect net income and comprehensive income? Complete this question by entering your answers in the tabs below. General Journal Effect What journal entries should LED record to account for any credit or noncredit losses in the current period? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the entry for credit or noncredit losses in the current period. Brief Exercise 12-17 (Static) HTM investments and impairment (Appendix 12B) (LO12-2, 12-8] LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities held to maturity. The market price of Branch's bonds fell by $450,000, due to concerns about one of the company's principal drugs. The concerns were justified when the FDA banned the drug. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250,000 as noncredit losses, LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for any credit or noncredit losses in the current period? How should the decline affect net income and comprehensive income? Complete this question by entering your answers in the tabs below. General Journal Effect How should the decline affect net income and comprehensive income? (Negative amounts should be entered with minus sign.) Effect $ (200,000) Net income Other comprehensive income Net effect on comprehensive income
