P17-7
(Available-for-Sale and Held-to-Maturity Debt Securities Entries)
The
following information relates to the debt securities investments of Wildcat
Company.
1. On
February 1, the company purchased 10% bonds of Gibbons Co. having a par value
of $300,000 at 100 plus accrued interest. Interest is payable April 1 and
October 1.
2. On April
1, semiannual interest is received.
3. On July
1, 9% bonds of Sampson, Inc. were purchased. These bonds with a par value of
$200,000 were purchased at 100 plus accrued interest. Interest dates are June 1
and December 1.
4. On
September 1, bonds with a par value of $60,000, purchased on February 1, are
sold at 99 plus accrued interest.
5. On
October 1, semiannual interest is received.
6. On
December 1, semiannual interest is received. 7. On December 31, the fair value
of the bonds purchased February 1 and July 1 are 95 and 93, respectively.
Instructions
(a) Prepare
any journal entries you consider necessary, including year-end entries
(December 31), assuming these are available-for-sale securities.
(b) If
Wildcat classified these as held-to-maturity investments, explain how the
journal entries would differ from those in part (a).
TUTORIAL PREVIEW
(a)
Date
|
Account Title and explanation
|
Debit
|
Credit
|
February 1
|
Debt Investments (available-for-sale)
|
300,000
| |
Interest Revenue (4/12 X .10 X $300,000)
|
10,000
| ||
Cash
|
310,000
|
File name: P17-7 Wildcat Company.docx File type: .docx PRICE: $10
