Question
Soto Industries Inc. is an athletic footware company that began operations on January 1, 20Y3. The following are bond (held-to-maturity) transactions by Soto Industries Inc.,
Soto Industries Inc. is an athletic footware company that began operations on January 1, 20Y3. The following are bond (held-to-maturity) transactions by Soto Industries Inc., which has a fiscal year ending on December 31: Record these transactions on page 10
20Y3 Apr. 1 Purchased $86,400 of Welch Co. 5%, 15-year bonds at their face amount plus accrued interest of $720. The bonds pay interest semiannually on March 1 and September 1. June 1 Purchased $64,800 of Bailey 5%, 10-year bonds at their face amount plus accrued interest of $135. The bonds pay interest semiannually on May 1 and November 1. Sept. 1 Received semiannual interest on the Welch Co. bonds. 30 Sold $36,000 of Welch Co. bonds at 97 plus accrued interest of $150. Nov. 1 Received semiannual interest on the Bailey bonds. Dec. 31 Accrued interest on the Welch Co. bonds. 31 Accrued interest on the Bailey bonds. Record these transactions on page 11
20Y4 Mar. 1 Received semiannual interest on the Welch Co. bonds. May 1 Received semiannual interest on the Bailey bonds. Required: 1. Journalize the entries to record these transactions. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Assume 360 days a year. Do not round your intermediate calculations and round final answers to the nearest dollar. 2. If the bond portfolio is classified as an available-for-sale investment, how would it be reported on the financial statements?
(CHART OF ACCOUNTSSoto Industries Inc.General Ledger
ASSETS | |
110 | Cash |
111 | Petty Cash |
120 | Accounts Receivable |
121 | Allowance for Doubtful Accounts |
131 | Notes Receivable |
132 | Interest Receivable |
141 | Merchandise Inventory |
145 | Office Supplies |
146 | Store Supplies |
151 | Prepaid Insurance |
161 | Investments-Welch Co. Bonds |
162 | Investments-Bailey Bonds |
165 | Valuation Allowance for Trading Investments |
166 | Valuation Allowance for Available-for-Sale Investments |
181 | Land |
191 | Store Equipment |
192 | Accumulated Depreciation-Store Equipment |
193 | Office Equipment |
194 | Accumulated Depreciation-Office Equipment |
LIABILITIES | |
210 | Accounts Payable |
221 | Notes Payable |
231 | Interest Payable |
241 | Salaries Payable |
251 | Sales Tax Payable |
EQUITY | |
311 | Common Stock |
312 | Paid-In Capital in Excess of Par-Common Stock |
321 | Preferred Stock |
322 | Paid-In Capital in Excess of Par-Preferred Stock |
331 | Treasury Stock |
332 | Paid-In Capital from Sale of Treasury Stock |
340 | Retained Earnings |
350 | Unrealized Gain (Loss) on Available-for-Sale Investments |
351 | Cash Dividends |
352 | Stock Dividends |
REVENUE | |
410 | Sales |
611 | Interest Revenue |
612 | Dividend Revenue |
631 | Gain on Sale of Investments |
641 | Unrealized Gain on Trading Investments |
EXPENSES | |
511 | Cost of Merchandise Sold |
512 | Bad Debt Expense |
515 | Credit Card Expense |
516 | Cash Short and Over |
520 | Salaries Expense |
531 | Advertising Expense |
532 | Delivery Expense |
533 | Repairs Expense |
534 | Selling Expenses |
535 | Rent Expense |
536 | Insurance Expense |
537 | Office Supplies Expense |
538 | Store Supplies Expense |
561 | Depreciation Expense-Store Equipment |
562 | Depreciation Expense-Office Equipment |
590 | Miscellaneous Expense |
710 | Interest Expense |
731 | Loss on Sale of Investments |
741 | Unrealized Loss on Trading Investments |
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