Reporting of and Analyzing Financial Effects of Available-for-sale (Debt) Securities

Hartgraves Company had the following transactions and adjustments related to a bond investment. Assume that when the bond was purchased, management did not intend to sell them in the near future.

2018
Oct. 1	Purchased $500,000 face value of Skyline, Inc.'s 7% bonds at 97 plus a brokerage commission of $1,000.
	The bonds pay interest on September 30 and March 31 and mature in 20 years.
	Hartgraves Company expects to sell the bonds in the near future.
Dec. 31	Made the adjusting entry to record interest earned on investment in the Skyline bonds.
Dec. 31	Made the adjusting entry to record the current fair value of the Skyline bonds.
	At December 31, 2018, the fair value of the Skyline bonds was $490,000.
2019
Mar. 31	Received the semiannual interest payment on investment in the Skyline bonds.
Apr. 1	Sold the Skyline bond investment for $492,300 cash.

a. Prepare journal entries to record these transactions. b. Post the journal entries from a to their respective T-accounts. c. Record each of the transactions in the financial statement effects template.

• Journal Entries
• T-Accounts
• Financial statement effects template

Use negative signs with your answers, when appropriate. Entry the net effect of a transaction in an answer field if it requires more than one entry.

		Balance Sheet		Income Statement
Transaction	Cash Asset	+	Noncash Asset	=	Liabilities	=	Contrib. Capital	+	Earned Capital	Revenues	-	Expenses	=	Net income
Purchase of bond.	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer
Interest earned on bond.	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer
Change in fair value of bond.	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer
Receipt of payment on bond.	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer
Sale of bond.	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer

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