E17.3 (LO 1) (Entries for Held-to-Maturity Securities) On January 1, 2020, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Hi and Lois Company uses the effective interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Instructions a. Prepare the journal entry at the date of the bond purchase b. Prepare a bond amortization schedule. c. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020 d. Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021. P17.5 (LO 2) Excel (Equity Securities Entries and Disclosures) Parnevik Company has the following securities in its investment portfolio on December 31, 2020 (all securities were purchased in 2020): (1) 3,000 shares of Anderson Co. common stock which cost $58,500 (2) 10,000 shares of Munter Lid. common stock which cost $580,000, and (3) 6,000 shares of King Company preferred stock which cost $255,000. The Fair Value Adjustment account shows a credit of $10,100 at the end of 2020. In 2021, Parnevik completed the following securities transactions 1. On January 15, sold 3,000 shares of Anderson's common stock at $22 por share less fees of $2,150. 2. On April 17. purchased 1,000 shares of Castle's common stock at $33.50 per share plus foes of $1,980. On December 31, 2021, the market prices per share of these securities were Munter $61, King $40, and Castle $29. In addition, the accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik will not actively trade these securities because the top management intends to hold them for more than one year. Instructions a. Prepare the entry for the security sale on January 15, 2021. b. Prepare the journal entry to record the security purchase on April 17, 2021. c. Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2021. d. How should the unrealized gains or losses be reported on Parnevik's income statement and balance sheet? E17.16 (LO 2.3) (Fair Value and Equity Method Compared) Jayce Phelps Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,200,000 for 50,000 shares. Kulikowski Inc, declared and paid an $0.85 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $730,000 for 2021. The fair value of Kulikowski's stock was $27 per share at December 31, 2021. Instructions a. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps cannot exercise significant influence over Kulkowski. b. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps can exercise significant influence over Kulikowski. c. At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2021? What is the total net income reported in 2021 under each of these methods
