Recording Entries for AFS Debt Securities Effective Interest Method

On January 1, 2020, Jules Company purchased for cash, $95,000 bonds (nineteen $5,000 bonds) of Android Corporation at a market rate of 6%. The bonds pay 6.5% interest, payable on a semiannual basis each June 30 and December 31, and mature on December 31, 2024. The bonds are classified as available-for-sale securities. The annual reporting period of Jules Company ends December 31. Assume the effective interest method of amortization of any discounts or premiums.

• Amortization Schedule
• Journal Entries for 2020
• Financial Statement Presentation

f. Determine the impact on the following financial statement categories for 2020, assuming no transactions other than those of the AFS securities.

Note: Use a negative sign to indicate a loss.

1. Other comprehensive income (loss)	Answer
2. Net income (loss)	Answer
3. Comprehensive income (loss)	Answer
4. Other revenues and gains	Answer
5. Other expenses and losses	Answer

g. Determine the balance in the Investment account on the balance sheet of December 31, 2020.

Investment in AFS securities, Dec. 31, 2020

Answer