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January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds ovide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each ecember 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, lowing IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. uring 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was wngraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. onditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at ecember 31, 2024. ) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2; 35,2 1,9

January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds ovide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each ecember 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, lowing IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. uring 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was wngraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. onditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at ecember 31, 2024. ) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2; 35,2 1,9

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 7MCQ
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15. answer part d2

On January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each December 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, following IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. During 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was downgraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. Conditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at December 31, 2024. (b) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2 35,2 1,9
Transcribed Image Text:On January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each December 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, following IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00. During 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was downgraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. Conditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at December 31, 2024. (b) Your Answer Correct Answer (Used) Prepare the entries to record Novak's purchase of the bonds on January 1, 2021, the recognition of interest income and interest received on December 31, 2021, and the fair value adjustment required at December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) Date Jan. 1, 2021 Dec. 31, 2021 Account Titles and Explanation FV-NI Investments Cash Cash Investment Income or Loss (To record collection of interest) Investment Income or Loss FV-NI Investments (To record fair value adjustment) Debit 316,289.83 35,280.00 1,989.83 Credit 316,2 35,2 1,9
Date Account Titles and Explanation Dec. 31, 2022 Dec. 31, 2023 (d2) Cash Investment Income or Loss Date (To record collection of interest) Dec. 31, 2024 Investment Income or Loss FV-NI Investments (To record fair value adjustment) Cash Investment Income or Loss (To record interest income) FV-NI Investments eTextbook and Media Investment Income or Loss List of Accounts (To record fair value adjustment) Account Titles and Explanation (To record collection of interest) Debit (To record fair value adjustment) 35280 Debit 62930 35280 4410 Credit Prepare all entries required for 2024, including recognition of the recovery of the impairment in value, if necessary. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) 35280 62930 I Credit 35280 4410 Attempts: 2 of 3 used
Transcribed Image Text:Date Account Titles and Explanation Dec. 31, 2022 Dec. 31, 2023 (d2) Cash Investment Income or Loss Date (To record collection of interest) Dec. 31, 2024 Investment Income or Loss FV-NI Investments (To record fair value adjustment) Cash Investment Income or Loss (To record interest income) FV-NI Investments eTextbook and Media Investment Income or Loss List of Accounts (To record fair value adjustment) Account Titles and Explanation (To record collection of interest) Debit (To record fair value adjustment) 35280 Debit 62930 35280 4410 Credit Prepare all entries required for 2024, including recognition of the recovery of the impairment in value, if necessary. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to 2 decimal places, e.g. 52.75.) 35280 62930 I Credit 35280 4410 Attempts: 2 of 3 used
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