On March 1, 2020, Gracie Company paid $55,000 to buy Remington Inc.'s 7% two-year bonds payable with a $60,000 par value. The bonds pay interest semiannually on August 31 and Feburary 28 and Gracie has the intent and ability to hold the bonds. On December 31, Gracie's year end, the bonds had a fair market value of $53,000. Identify the classification of these bonds (trading, held-to-maturity, available-for-sale) and prepare the journal entries to be recorded by Gracie Company in 2020.

On January 1, 2020, Tyler Company paid $120,000 to buy Biscuit Inc.'s 11% four-year bonds payable with a $100,000 par value. The bonds pay interest semiannually on June 30 and December 31. Tyler intends to trade these bonds on the exchange. On December 31, Tyler's year end, the bonds had a fair market value of $125,000. Identify the classification of these bonds (trading, held-to-maturity, available-for-sale) and prepare the journal entries to be recorded by Tyler Company in 2020.

On June 1, 2020, Kimberly Company paid $80,000 (equivalent to par) to buy available-for-sale debt investments. These investmetns pay interest on November 30 and May 30 at a rate of 6%. On December 31, Kimberly's year end, the bonds had a fair market value of $82,500. Identify the classification of these bonds (trading, held-to-maturity, available-for-sale) and prepare the journal entries to be recorded by Kimberly Company in 2020.

On October 12, 2020, Topaz Company purchased 15% of Midnight Industries for $32,000. On December 1, 2020 Midnight paid a total of $60,000 in cash dividends to its shareholders. Midnight also had net income of $178,000 for the year. On December 31, Topaz's year end, the investment had a fair market value of $30,000. On January 21, 2021, Topaz sold 5% of its invesment in Midnight for $3,000. Identify the classification of the investment (insignificant, significant, or controlling influence) and prepare the journal entries to be recorded by Topaz Company in 2020 and for the sale in 2021.

(Q5 )On June 1, 2020, Leon Company paid $225,000 to purchase 35% of the stock in Caity Company. On December 15, Caity Company paid out $120,000 in dividends to its shareholders and reported net income of $201,500. On December 31, Leon's year end, the investment had a fair market value of $240,000. Identify the classification of the investment (insignifiant, significant, or controlling influence) and prepare the journal entries to be recorded by Leon Company in 2020.

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