Question:Gaelic Industries Inc. is an athletic footware company that began operations on January 1, 2016. The following transactions relate to debt investments acquired by Gaelic Industries Inc., which has a fiscal year ending on December 31:

Record these transactions on page 10

2016:

May1: Purchased $70,200 of Avery Co. 6%, 15-year bonds at their face amount plus accrued interest of $702. The bonds pay interest semiannually on March 1 and September 1.

16: Purchased $57,600 of Clawhammer 5%, 10-year bonds at their face amount plus accrued interest of $120. The bonds pay interest semiannually on May 1 and November 1.

Sept.1: Received semiannual interest on the Avery Co. bonds.

30: Sold $27,600 of Avery Co. bonds at 98 plus accrued interest of $138.

Nov.1: Received semiannual interest on the Clawhammer bonds.

Dec.31: Accrued $852 interest on the Avery Co. bonds.31Accrued $480 interest on the Clawhammer bonds.

Record these transactions on page 11

2017

Mar.1: Received semiannual interest on the Avery Co. bonds.

May1: Received semiannual interest on the Clawhammer bonds.

Required:

1.Journalize the entries to record these transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. In your computations, round per share amounts to two decimal places.

2.If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be to be_______. This would be accomplished by using a valuation allowance account and an unrealized gain (loss) account as part of_____. If the fair value were_____than the cost of the bond portfolio, the two accounts would be positive, and thus added to investments and stockholders' equity, respectively. If the fair value were_____than the cost of the bond portfolio, the two accounts would be negative , and thus subtracted from investments and stockholders' equity, respectively.