1. In October, Davis took some equipment out of service that was replaced with more efficient machines. The original cost of the equipment was $70,000. The equipment was purchased in 2018 and was being depreciated over an 8-year life. Davis is looking for a buyer for the equipment. The company estimates the equipment will sell within a few months at the asking price of $15,000.

2. Davis invested $100,000 in 7 year, 7% bonds on July 1, 2022 issued by Perez Corp. The bonds pay interest semi-annually on June 30 and Dec. 31 and were priced to yield 9% interest. Davis received the first interest payment on Dec. 31, 2022. The company plans to hold on to these bonds and use the interest payments over the next 7 years to help fund company benefits for employees. (You do not need to record any of the employee benefit costs; they have already been accounted for. Just do the entries related to the bonds.) The Perez bonds were selling at 94 on Dec. 31, 2022.

3.On January 1, 2022 Davis purchased $200,000 of 11%, 10-year bonds issued by Lin Technologies. The bonds were priced to yield 10% interest. The bonds pay interest semi-annually on June 30 and Dec. 31. While the bonds were originally purchased for their high interest rate, Davis now believes Lins bond rating will increase in the first couple of months of 2022 due to the companys expansion. This should drop the effective interest rate for Lins bonds and Davis plans to sell them when the prices rise at a profit. As of December 31, 2022, the bonds are selling at 107.

Davis uses the effective interest method to amortize any discounts or premiums on investments and bonds payable. The company uses straight-line depreciation for plant assets assuming no residual value. The company policy is to take a full years depreciation in the year of acquisition for any plant asset and no depreciation in the year of sale/disposal.

When recording transactions related to investments, use the balance sheet accounts below to keep the categories of investments separate. You do not need to separate out the income statement accounts (such as interest revenue, dividend revenue, gains or losses) by investment category. For example, while you DO need an Interest Revenue account, but you DONT need separate Interest Revenue accounts for Investment in Bonds at Fair Value and Investment in Bonds at Amortized Cost.

Investment in Equity Affiliate

Investment in Equity Securities

Fair Value Adjustment Equity Securities *Hint: also consider if the investment is

Investment in Bonds (at Amortized Cost) current or long-term

Investment in Bonds (at Fair Value)

Fair Value Adjustments Bonds

Premium on Bond Investments

Discount on Bond Investments