The following Liu Corporation transactions are for bonds that were purchased as trading investments for the year

Question:

The following Liu Corporation transactions are for bonds that were purchased as trading investments for the year ended December 31, 2015:

Jan. 1 Purchased $100,000 of RAM Corporation 8% bonds at 96 (this means 96% of maturity value).

Interest is received semi-annually on July 1 and January 1. The bonds mature on January 1, 2017.

July 1 Received interest on the RAM bonds.

2 Sold $25,000 of RAM bonds at 100.

Dec. 31 Accrued interest on the remaining bonds.

31 The fair value of the remaining bonds was 101 on this date.

Instructions

(a) Record the above transactions, including any required adjusting entries, using the fair value through profit or loss model.

(b) Show how the investments would be presented on the statement of financial position at December 31, 2015.

(c) Determine the balance in each of the income statement accounts that are affected in the transactions above and indicate how they would be presented on the income statement for the year ended December 31, 2015?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For  book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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