On December 31, 2018, Marsh Company held Xenon Company bonds in its portfolio of available-for-sale securities. The bonds have a par value of $15,000, carry a 10% annual interest rate, mature in 2025, and had originally been purchased at par. The market value of the bonds at December 31, 2018 was $13,000. The December 31, 2018, balance sheet showed the following: Marsh Company Partial Balance Sheet December 31, 2018 Assets Investment in Available-for-Sale Securities $15,000.00 Less: Allowance for Change in Fair Value of Investment (2,000.00) $13,000.00 Shareholders'Equity: 6 Unrealized Holding Gain/Loss $(2,000.00) On January 1, 2019, Marsh acquired bonds of Yellow Company with a par value of $16,000 for $16,200. The Yellow Company bonds carry an annual interest rate of 12% and mature on December 31, 2023. Additionally, Marsh acquired Zebra Company bonds with a face value of 18,000 for $17,600. The Zebra Company bonds carry an 8% annual interest rate and mature on December 31, 2028. At the end of 2019, the respective market values of the bonds were: Xenon, $14,000; Yellow, $17,000; and Zebra, $20,000. Marsh classifies all of the debt securities as available-for-sale as it does not intend to hold them to maturity nor does it intend to actively buy and sell them. Assume that Marsh uses the straight-line method to amortize any discounts or premiums. Required: 1. Prepare the journal entries necessary to record the purchase of the investments on January 1, 2019, the annual interest payments on December 31, 2019, and the adjusting entry needed on December 31, 2019. 2. What would Marsh disclose on its December 31, 2019, balance sheet related to these investments? Chart of Accounts General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 114 Investment in Available-for-Sale Securities 431 Interest Income 119 Allowance for Change in Fair Value of Investment 121 Accounts Receivable EXPENSES 141 Inventory 500 Cost of Goods Sold 511 Insurance Expense 152 Prepaid Insurance 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Salaries Payable 559 Miscellaneous Expenses 250 Unearned Revenue 910 Income Tax Expense 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 391 Unrealized Holding Gain/Loss: Available-for-Sale Securities 1. Prepare the journal entries necessary to record the purchase of the investments in 2019, the annual interest payments on December 31, 2019. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Adjusting Entries 2. What would Marsh disclose on its December 31, 2019, balance sheet related to these investments ? Balance Sheet Instructions Marsh Company Partial Balance Sheet December 31, 2019 Assets: Shareholders' Equity
