Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1 Tsunami Sushi purchases $160,000 of 5-year, 6% bonds from Deep Sea Explorers on January 1. Management intends to hold the debt securities to

Question 1

Tsunami Sushi purchases $160,000 of 5-year, 6% bonds from Deep Sea Explorers on January 1. Management intends to hold the debt securities to maturity. For bonds of similar risk and maturity, the market rate is 7%. Tsunami paid $153,347 for the bonds. It receives interest semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31 is $152,000. Required: 1., 2. & 3. Record the necessary entries regarding the bonds. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar amount.)

1. Record the purchase of bonds.

Date General Journal Debit Credit
January 01

2. Record the receipt of first semiannual interest payment.

Date General Journal Debit Credit
June 30

3. Record the receipt of second semiannual interest payment.

Date General Journal Debit Credit
December 31

Question 2

4. At what amount will Tsunami Sushi report its investment in the December 31 balance sheet? (Round your answer to the nearest whole dollar amount.)

Investment

Question 3

5. Suppose Tsunami Sushi decides on December 31 that it no longer intends to hold the debt securities until maturity and will likely sell them early next year. Record any necessary fair value adjusting. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar amount.)

1. Record adjusting entry of investments to fair value.

Date General Journal Debit Credit
December 31

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

Strategic Market Management

Authors: David A. Aaker

5th Edition

0471177431, 9780471177432

More Books

Students also viewed these Accounting questions