Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Oriole Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Feb.

Oriole Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions.

Feb. 1, 2017 Sharapova Company common stock, $110 par, 220 shares $36,300
April 1 U.S. government bonds, 12%, due April 1, 2027, interest payable April 1 and October 1, 108 bonds of $1,000 par each 108,000
July 1 McGrath Company 12% bonds, par $53,500, dated March 1, 2017, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2037 57,780

1. Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale.

Account Titles & Explanation Debit Credit
Debt Investments
Equity Investments
Interest Revenue
Investment

2. Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2017, using the straight-line method.

Date Account Titles & Explanation Debit Credit
Dec 31, 2017 Interest Receivable
Debt Investments
Interest Revenue

3. The fair values of the investments on December 31, 2017, were:

Sharapova Company common stock $32,100
U.S. government bonds 116,400
McGrath Company bonds 59,100

What entry, if any, would you recommend be made?

Date Account Titles & Explanation Debit Credit
Dec 31, 2017 Fair Value Adjustment
Unrealized Holding Gain or Loss - Equity?

(Entry for debt investment)

Date Account Title & Explanation Debit Credit
Dec 31, 2017 Unrealized Holding Gain or Loss - Equity
Fair Value Adjustment

(Entry for equity investment)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Volume 1

Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel

8th Edition

1260881237, 9781260881233

More Books

Students also viewed these Accounting questions

Question

Do you suggest Lisa use a PEO? Why?

Answered: 1 week ago