Akers Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in trading debt securities: Security Par Value Amortized Cost 12/31/18 Fair Value Ivan Company 5% bonds, maturing on Dec. 31, 2028 $10,000 $8,400 $9,400 Taylor Company 6% bonds, maturing on Dec. 31, 2023 $40,000 $43,200 $41,800 Totals $51,600 $51,200 During 2019, the following transactions occurred: Mar. 31 Purchased Hill Company 8% bonds with a face value of $20,000 for $20,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31. Mar. 31 Sold the Taylor Company investment for $42,000 plus accrued interest. The Taylor bonds pay interest on December 31 of each year. June 30 Received the semiannual interest on the Hill Company bonds. Dec. 31 Received the annual interest on the Ivan Company bonds and the semiannual interest on the Hill Company bonds. The December 31 closing market prices were as follows: Ivan Company bonds, $9,000; and Hill Company 8% bonds $20,100. Akers uses the straight-line method to amortize any discounts or premiums. Required: 1. Prepare journal entries to record the preceding information. 2. Show what is reported on Akers’s 2019 income statement. 3. Assuming the investment in Ivan Company bonds is considered to be a current asset and the investment in Hill Company bonds is considered to be a noncurrent asset, show how all the items are reported on Akers’s December 31, 2019, balance sheet. X Chart of Accounts CHART OF ACCOUNTS Akers Company General Ledger ASSETS 111 Cash 113 Investment in Trading Securities 121 Accounts Receivable 127 Interest Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 431 Interest Income 441 Gain on Sale of Trading Securities EXPENSES

Akers Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in trading debt securities: Security Par Value Amortized Cost 12/31/18 Fair Value Ivan Company 5% bonds, maturing on Dec. 31, 2028 $10,000 $8,400 $9,400 Taylor Company 6% bonds, maturing on Dec. 31, 2023 $40,000 $43,200 $41,800 Totals $51,600 $51,200 During 2019, the following transactions occurred: Mar. 31 Purchased Hill Company 8% bonds with a face value of $20,000 for $20,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31. Mar. 31 Sold the Taylor Company investment for $42,000 plus accrued interest. The Taylor bonds pay interest on December 31 of each year. June 30 Received the semiannual interest on the Hill Company bonds. Dec. 31 Received the annual interest on the Ivan Company bonds and the semiannual interest on the Hill Company bonds. The December 31 closing market prices were as follows: Ivan Company bonds, $9,000; and Hill Company 8% bonds $20,100. Akers uses the straight-line method to amortize any discounts or premiums. Required: 1. Prepare journal entries to record the preceding information. 2. Show what is reported on Akers’s 2019 income statement. 3. Assuming the investment in Ivan Company bonds is considered to be a current asset and the investment in Hill Company bonds is considered to be a noncurrent asset, show how all the items are reported on Akers’s December 31, 2019, balance sheet. X Chart of Accounts CHART OF ACCOUNTS Akers Company General Ledger ASSETS 111 Cash 113 Investment in Trading Securities 121 Accounts Receivable 127 Interest Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 431 Interest Income 441 Gain on Sale of Trading Securities EXPENSES

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 21E: Mills Company had five convertible securities outstanding during all of 2019. It paid the...

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Question

Akers Company invests its excess cash in marketable securities. At the beginning of 2019, it had the following portfolio of investments in trading debt securities:

Security	Par Value	Amortized Cost	12/31/18 Fair Value
Ivan Company 5% bonds, maturing on Dec. 31, 2028	$10,000	$8,400	$9,400
Taylor Company 6% bonds, maturing on Dec. 31, 2023	$40,000	$43,200	$41,800
Totals		$51,600	$51,200

During 2019, the following transactions occurred:

Mar. 31	Purchased Hill Company 8% bonds with a face value of $20,000 for $20,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31.
Mar. 31	Sold the Taylor Company investment for $42,000 plus accrued interest. The Taylor bonds pay interest on December 31 of each year.
June 30	Received the semiannual interest on the Hill Company bonds.
Dec. 31	Received the annual interest on the Ivan Company bonds and the semiannual interest on the Hill Company bonds.

The December 31 closing market prices were as follows: Ivan Company bonds, $9,000; and Hill Company 8% bonds $20,100. Akers uses the straight-line method to amortize any discounts or premiums.

Required:

1.	Prepare journal entries to record the preceding information.
2.	Show what is reported on Akers’s 2019 income statement.
3.	Assuming the investment in Ivan Company bonds is considered to be a current asset and the investment in Hill Company bonds is considered to be a noncurrent asset, show how all the items are reported on Akers’s December 31, 2019, balance sheet.

Chart of Accounts

CHART OF ACCOUNTS

Akers Company

General Ledger

	ASSETS
111	Cash
113	Investment in Trading Securities
121	Accounts Receivable
127	Interest Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Income
441	Gain on Sale of Trading Securities

	EXPENSES

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