Question
On June 1, 2019, Hansen Company purchased ten $1,000 Francisco Company bonds at par and classified them as held-to-maturity. In 2020, Francisco experienced financial difficulties
On June 1, 2019, Hansen Company purchased ten $1,000 Francisco Company bonds at par and classified them as held-to-maturity. In 2020, Francisco experienced financial difficulties and on Dec 31, 2020, based on an evaluation of the investment, Hansen determined that expected credit losses are $4,000. In 2021, Francisco improved its financial condition, and, on Dec 31, 2021, Hansen believed that expected credit losses would only be $2,000.
Required: Prepare the journal entries for Hansen to record the above events under U.S. GAAP. for the 2019, 2020, 2021 years
CHART OF ACCOUNT
ASSETS | |
111 | Cash |
113 | Investment in Trading Securities |
114 | Investment in Available-for-Sale Securities |
119 | Allowance for Change in Fair Value of Investment |
121 | Accounts Receivable |
141 | Inventory |
152 | Prepaid Insurance |
181 | Equipment |
189 | Accumulated Depreciation |
191 | Investment in Held-to-Maturity Debt Securities |
192 | Allowance for Credit Losses |
LIABILITIES | |
211 | Accounts Payable |
231 | Salaries Payable |
250 | Unearned Revenue |
261 | Income Taxes Payable |
EQUITY | |
311 | Common Stock |
331 | Retained Earnings |
REVENUE | |
411 | Sales Revenue |
431 | Interest Income |
441 | Gain on Transfer of Investment |
EXPENSES | |
500 | Cost of Goods Sold |
511 | Insurance Expense |
512 | Utilities Expense |
521 | Salaries Expense |
532 | Bad Debt Expense |
540 | Interest Expense |
541 | Depreciation Expense |
559 | Miscellaneous Expenses |
910 | Income Tax Expense |
912 | Unrealized Holding Gain/Loss |
914 | Loss on Impairment |
915 | Credit Loss Expense |
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