Soto Industries Inc is an athletic footware company that began operations on January 1, Year 1 The following transactions relate to debt investments acquired by Soto Industries Inc , which has a fiscal year ending on December 31 Record these transactions on page 10 Year 1 Apr 1 Purchased $85,800 of Welch Co 10 , 15 year bonds at their face amount plus accrued interest of $1,430 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 $26,400 of Welch Co bonds at 96 plus accrued interest of $220 Nov 1 Received semiannual interest on the Bailey bonds Dec 31 Accrued $1,980 interest on the Welch Co bonds 31 Accrued $540 interest on the Bailey bonds Record these transactions on page 11 Year 2 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 information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries 2 If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure CHART OF ACCOUNTS Soto 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 390 Income Summary REVENUE 410 Sales 611 Interest Revenue 612 Dividend Revenue 631 Gain on Sale of Investments 641 Unrealized Gain on Trading Investments 1a Journalize the entries to record Year 1 transactions Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries

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Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by

Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31: Record these transactions on page 10 Year 1 Apr. 1. Purchased $85,800 of Welch Co. 10%, 15-year bonds at their face amount plus accrued interest of $1,430. 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 $26,400 of Welch Co. bonds at 96 plus accrued interest of $220. Nov. 1 Received semiannual interest on the Bailey bonds. Dec. 31 Accrued $1,980 interest on the Welch Co. bonds. 31 Accrued $540 interest on the Bailey bonds.

Record these transactions on page 11 Year 2 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 information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. 2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

CHART OF ACCOUNTS

Soto 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
390	Income Summary

	REVENUE
410	Sales
611	Interest Revenue
612	Dividend Revenue
631	Gain on Sale of Investments
641	Unrealized Gain on Trading Investments

1a. Journalize the entries to record Year 1 transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.