Question
On January 1, 20x1, JME invested in 5% bonds of Fishing, Inc. that were purchased at par. Interest is paid annually on December 31. Certain
On January 1, 20x1, JME invested in 5% bonds of Fishing, Inc. that were purchased at par. Interest is paid annually on December 31. Certain data for 20X1 and 20X2 are as follows -
year # bonds purchased Cost per bond Mkt price of bonds on 12/31
20X1 50 $1,000 97% of face value
20X2 n/a n/a 95% of face value
1 - JME has no other investment securities (disregard Requirement #1 information)
2 - These are AVAILABLE-FOR-SALE SECURITIES (AFS) under ASC 220 - i.e., securities bought and are available to sell if cash needs arise or the market conditions are favorable. AFS debt securities are not planned to be sold in the very near future like an actively managed trading security. Nor does JME plan to hold the debt security till it reaches maturity like a "held to maturity" investment.
3 - JME applies ASC 320in both 20X1 and 20X2
4 - No investments were sold in 20X1
5 - On 2/27/X2 JME sold all the Fishing bonds for cash at a price of$46,500.
6 - Prior to recording the sale of any security, JME records an adjustment to the value of its whole portfolio of AFS
7 - You may ignore taxes
1 - In the table shown on the next page, you are to record all journal entries, if required, on the dates indicated.Some of the account titles JME uses include:
Cash
Interest Income
Investment in Bonds
Fair Value Adjustment
Gain on Investments (unrealized OCI)
Loss on Investments (unrealized OCI)
Reclassification Adjustment (OCI)
Gain on Investments (NI)
Loss on Investments (NI)
2- Show computations where applicable.
1/1/X1
12/31/X1
12/31/X1
2/27/X2
2 - Following are amounts from the F/S of JME, Inc.BEFOREgiving consideration to the AFS securities transactions
Item
20X1 20X2
Net Income
170,000 180,000
Cash flow from operating activities
250,000 260,000
Cash flow from investing activities
<97,000>. <69,000>
Cash flow from financing activities
80,000. 75,000
You are to restate the above amountsAFTERconsideration of the transactions
Item
20X1 20X2
Net Income
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
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