enter answersfor journal items [A] to [W]

Illini Company, Inc. Balance Sheet as of 12/31/20X0

Assets Current Assets: Cash 1,500,000 Accounts receivable, net18,000 Inventory50,000 Total current assets 1,568,000 Equipment 90,000 Goodwill 20,000 Total assets $1,678,000

Liabilities and shareholders' equity Shareholders' equity: Common stock, 20,000 shares outstanding, $1 par 20,000 Additional paid-in capital 280,000 Retained earnings 1,378,000 Total shareholders' equity 1,678,000 Total liabilities and shareholders' equity 1,678,000

Note that all additional paid-in capital (APIC) sub accounts (e.g., APIC-options and APIC-treasury stock), if any, are tracked in the Additional paid-in capital account on the Balance Sheet.

Project 2.1 Part 3

On 1/1/20X1, Illini issued 10% bonds dated 1/1/20X1, with a face amount of $40,000. The bonds mature on 12/31/20X4 (4 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Suppose Illini elects the fair value option to account for these (and only these) bonds and adjust for the fair value changes on every June 30 and December 31. The market interest rates for bonds of similar risk and maturity on 6/30/20X1, 12/31/20X1, 6/30/20X2, and 12/31/20X2 are 10%, 8%, 12%, and 15% respectively. All interest rate changes are due to Illinis own credit risk changes.

Date	Account Name		Debit	Credit
1/1/20X1	Cash		[A]
	Discount on bonds		[B]
		Bonds payable		[C]
6/30/20X1	Interest expense		[D]
		Discount on bonds		[E]
		Cash		[F]
6/30/20X1	Unrealized holding gain/loss-OCI		[G]
		Fair value adjustment		[H]
12/31/20X1	Interest expense		[I]
		Discount on bonds		[J]
		Cash		[K]
12/31/20X1	Unrealized holding gain/loss-OCI		[L]
		Fair value adjustment		[M]
6/30/20X2	Interest expense		[N]
		Discount on bonds		[O]
		Cash		[P]
6/30/20X2	Fair value adjustment		[Q]
		Unrealized holding gain/loss-OCI		[R]
12/31/20X2	Interest expense		[S]
		Discount on bonds		[T]
		Cash		[U]
12/31/20X2	Fair value adjustment		[V]
		Unrealized holding gain/loss-OCI		[W]