Question
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)
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