Transactions for Bond (Held-to-Maturity) Investments

Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, 20Y5. The following are bond (held-to-maturity) transactions by Rekya Mart Inc., which has a fiscal year ending on December 31:

20Y5
Apr. 1.	Purchased $60,000 of Smoke Bay 5%, 10-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on February 1 and August 1.
May 16.	Purchased $132,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $330. The bonds pay interest semiannually on May 1 and November 1.
Aug. 1.	Received semiannual interest on the Smoke Bay bonds.
Sept. 1.	Sold $24,000 of Smoke Bay bonds at 103 plus accrued interest of $100.
Nov. 1.	Received semiannual interest on the Geotherma Co. bonds.
Dec. 31	Accrued interest on the Smoke Bay bonds.
Dec. 31	Accrued interest on the Geotherma Co. bonds.
20Y6
Feb. 1.	Received semiannual interest on the Smoke Bay bonds.
May 1.	Received semiannual interest on the Geotherma Co. bonds.

Required:

1. Journalize the entries to record these transactions. If an amount box does not require an entry, leave it blank. Do not round your intermediate calculations and round final answers to the nearest dollar. Use the nearest whole month for the interest period.

Date	Description	Debit	Credit
20Y5
Apr. 1.	Bonds PayableCashInterest RevenueInvestments-Smoke Bay BondsNotes Receivable
	CashInterest ReceivableInterest RevenueInterest RevenueNotes Receivable
	Bonds PayableCashInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable
May 16.	Bonds PayableCashInterest RevenueInvestments-Geotherma Co. BondsNotes Receivable
	CashInterest PayableInterest ReceivableInterest RevenueNotes Receivable
	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds
Aug. 1.	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds
	CashInterest PayableInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable
	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds
Sept. 1.	CashGain on Sale of InvestmentInterest PayableInvestments-Smoke Bay BondsRetained Earnings
	Bonds PayableInterest RevenueLoss on Sale of InvestmentNotes ReceivableRetained Earnings
	CashGain on Sale of InvestmentInterest ReceivableInterest RevenueLoss on Sale of Investment
	CashInterest RevenueInvestments-Smoke Bay BondsLoss on Sale of InvestmentNotes Receivable
Nov. 1.	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds
	CashInterest PayableInterest ReceivableInvestments-Geotherma Co. BondsNotes Receivable
	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds
Dec. 31 Smoke Bay	CashInterest ReceivableInterest RevenueInvestments-Smoke Bay BondsNotes Receivable
	CashInterest ReceivableInterest RevenueInvestments-Smoke Bay BondsNotes Receivable
Dec. 31 Geotherma Co.	CashInterest ExpenseInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds
	CashInterest ReceivableInterest RevenueInvestments-Geotherma Co. BondsNotes Receivable
20Y6
Feb. 1.	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds
	CashInterest PayableInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable
	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds
May 1.	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds
	CashInterest PayableInterest ReceivableInvestments-Geotherma Co. BondsNotes Receivable
	Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be adjusted to _______.

This would be recorded by using a valuation allowance account and _______ account.