FINANCIAL ACCOUNTING II Hammond, Inc. purchased NOLA Corp. $6\%$ mortgage bonds on December $16,2019,$ at their face amount of $$100,000.$ The bonds will mature on June $30,2031.$ As of December $31,2019,$ the market value of these bonds had increased to $$130,000.$ Provide the journal entry that would be necessary for this bond investment at December $31,2019,$ under each of the following alternatives: Alternative $1$: Hammond intends to hold the bonds for an unspecified period, hopefully to take advantage of an increase in market value. However, Hammond will be ready to sell the bonds when the time is right." Alternative $2$: Hammond intends to hold the bonds to maturity. B$.$ On August $8,2020,$ Hammond sold the NOLA bonds as described above for $$135,000.$ Provide the journal entries that would be required for this transaction under both Alternatives $1$ and $2.$ C$.$ Assume that Hammond had purchased NOLA Corp. common stock $($as a trading security$)$ on December $16,2019,$ rather than NOLA's bonds, for $$100,000.$ Likewise, the market value of the NOLA stock at December $31,2019$ increased to $$130,000.$ What journal entry would Hammond make for the sale of the NOLA stock for $$135,000$ on August $8,2020?$

Trading Security

Held to Maturity

Nedd Arailable for Sule

Ch$-12$

FINANCIAL ACCOUNTING II

A$.$ Hammond, Inc. purchased NOLA Corp. $6\%$ mortgage bonds on December $16,2019.)$

at their face amount of $$100,000.$ The bonds will mature on June $30,2031.)$ As of

December $31,2019),$ the market value of these bonds had increased to $$130,000.$

Provide the journal entry that would be necessary for this bond investment at December

$31,2019,$ under each of the following alternatives:

Alternative $1$: Hammond intends to hold the bonds for an unspecified period, hopefully to

take advantage of an increase in market value. However, Hammond will

be ready to sell the bonds when "the time is right."

Alternative $2$: Hammond intends to hold the bonds to maturity.

B$.$ On August $8,2020,$ Hammond sold the NOLA bonds as described above for

$$135,000.$ Provide the journal entries that would be required for this transaction under

both Alternatives $1$ and $2.$

C$.$ Assume that Hammond had purchased NOLA Corp. common stock $($as a trading

security$)$ on December $16,2019,$ rather than NOLA's bonds, for $$100,000.$ Likewise, the

market value of the NOLA stock at December $31,2019$ increased to $$130,000.$ What

journal entry would Hammond make for the sale of the NOLA stock for $$135,000$ on

August $8,2020?$

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