Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Red Inc., a public company entered into the following transactions during the year ended December 31, 2021: 1) On January 2, 2021, purchased $260,000 of
Red Inc., a public company entered into the following transactions during the year ended December 31, 2021: | ||||||||||||||||
1) On January 2, 2021, purchased $260,000 of the 6% bonds of Miron Ltd. The bonds mature on December 31, 2025 and pay interest every June and December 31. The bond were purchased to yield 5%. | ||||||||||||||||
2) 2,800 shares of Teal Company at a cost of $21 per share. No dividends were paid during 2021. Transaction costs of $1,500 were paid for this transaction. | ||||||||||||||||
Required | ||||||||||||||||
a) Prepare the journal entries for the investment in the bonds of Miron for the year 2021 assuming Red Inc. uses the Amortized Cost method to account for the bonds. | ||||||||||||||||
b) Assume that on December 31, 2021, the market value of the Miron bonds was $280,000. If Red Inc. classified the bonds as FVTOCI: | ||||||||||||||||
i) Prepare the journal entry at December 31, 2021 to adjust the bonds to the fair value. | ||||||||||||||||
ii) What would be the interest revenue for the 6 months ended June 30, 2022? | ||||||||||||||||
c) Assume that 1,800 shares of Teal Company were sold on July 1, 2022 at a price of $25 per share. The transaction costs of $700 were paid for this transaction. | ||||||||||||||||
The remaining shares had a market value of $30 on December 31, 2022. Write all journal entries relative to Teal Company shares assuming that these are classified as FVTOCI. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started