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 $36,000 of Smoke Bay 5%, 10-year bonds at their face amount plus accrued interest of $300. The bonds pay interest semiannually on February 1 and August 1.
May 16.	Purchased $114,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $285. The bonds pay interest semiannually on May 1 and November 1.
Aug. 1.	Received semiannual interest on the Smoke Bay bonds.
Sept. 1.	Sold $14,400 of Smoke Bay bonds at 104 plus accrued interest of $60.
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.