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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

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 $54,000 of Smoke Bay 4%, 10-year bonds at their face amount plus accrued interest of $360. The bonds pay interest semiannually on February 1 and August 1.
May 16. Purchased $104,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $260. The bonds pay interest semiannually on May 1 and November 1.
Aug. 1. Received semiannual interest on the Smoke Bay bonds.
Sept. 1. Sold $21,600 of Smoke Bay bonds at 104 plus accrued interest of $72.
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

fill in the blank 2 fill in the blank 3

CashInterest ReceivableInterest RevenueInterest RevenueNotes Receivable

fill in the blank 5 fill in the blank 6

Bonds PayableCashInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable

fill in the blank 8 fill in the blank 9
May 16.

Bonds PayableCashInterest RevenueInvestments-Geotherma Co. BondsNotes Receivable

fill in the blank 11 fill in the blank 12

CashInterest PayableInterest ReceivableInterest RevenueNotes Receivable

fill in the blank 14 fill in the blank 15

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 17 fill in the blank 18
Aug. 1.

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds

fill in the blank 20 fill in the blank 21

CashInterest PayableInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable

fill in the blank 23 fill in the blank 24

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds

fill in the blank 26 fill in the blank 27
Sept. 1.

CashGain on Sale of InvestmentInterest PayableInvestments-Smoke Bay BondsRetained Earnings

fill in the blank 29 fill in the blank 30

Bonds PayableInterest RevenueLoss on Sale of InvestmentNotes ReceivableRetained Earnings

fill in the blank 32 fill in the blank 33

CashGain on Sale of InvestmentInterest ReceivableInterest RevenueLoss on Sale of Investment

fill in the blank 35 fill in the blank 36

CashInterest RevenueInvestments-Smoke Bay BondsLoss on Sale of InvestmentNotes Receivable

fill in the blank 38 fill in the blank 39
Nov. 1.

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 41 fill in the blank 42

CashInterest PayableInterest ReceivableInvestments-Geotherma Co. BondsNotes Receivable

fill in the blank 44 fill in the blank 45

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 47 fill in the blank 48
Dec. 31 Smoke Bay

CashInterest ReceivableInterest RevenueInvestments-Smoke Bay BondsNotes Receivable

fill in the blank 50 fill in the blank 51

CashInterest ReceivableInterest RevenueInvestments-Smoke Bay BondsNotes Receivable

fill in the blank 53 fill in the blank 54
Dec. 31 Geotherma Co.

CashInterest ExpenseInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 56 fill in the blank 57

CashInterest ReceivableInterest RevenueInvestments-Geotherma Co. BondsNotes Receivable

fill in the blank 59 fill in the blank 60
20Y6
Feb. 1.

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds

fill in the blank 62 fill in the blank 63

CashInterest PayableInterest ReceivableInvestments-Smoke Bay BondsNotes Receivable

fill in the blank 65 fill in the blank 66

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Smoke Bay Bonds

fill in the blank 68 fill in the blank 69
May 1.

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 71 fill in the blank 72

CashInterest PayableInterest ReceivableInvestments-Geotherma Co. BondsNotes Receivable

fill in the blank 74 fill in the blank 75

Bonds PayableCashInterest ReceivableInterest RevenueInvestments-Geotherma Co. Bonds

fill in the blank 77 fill in the blank 78

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

fair valuehistorical cost

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

a realized gain (loss)an unrealized gain (loss)

account

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