Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2020. This is Dawson Company's first year of operations. Carrying Amount Fair Value (at December 31) Investment in debt securities (intent is to hold to maturity) $ 40,000 $ 41,000 Investment in Chen Company stock 800,000 910,000 Bonds payable 220,000 195,000 Instructions a. Dawson elects to use the fair value option for these investments. Assuming that Dawson's net income is $100,000 in 2020 before reporting any securities gains or losses, determine Dawson's net income for 2020. Assume that the difference between the carrying value and fair value is due to credit deterioration. b. Record the journal entry, if any, necessary at December 31, 2020, to record the fair value option for the bonds payable.

Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2020. This is Dawson Company's first year of operations. Carrying Amount Fair Value (at December 31) Investment in debt securities (intent is to hold to maturity) $ 40,000 $ 41,000 Investment in Chen Company stock 800,000 910,000 Bonds payable 220,000 195,000 Instructions a. Dawson elects to use the fair value option for these investments. Assuming that Dawson's net income is $100,000 in 2020 before reporting any securities gains or losses, determine Dawson's net income for 2020. Assume that the difference between the carrying value and fair value is due to credit deterioration. b. Record the journal entry, if any, necessary at December 31, 2020, to record the fair value option for the bonds payable.

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

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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a. Dawson elects to use the fair value option for these investments. Assuming that Dawson's net income is $100,000 in 2020 before reporting any securities gains or losses, determine Dawson's net income for 2020. Assume that the difference between the carrying value and fair value is due to credit deterioration.

b. Record the journal entry, if any, necessary at December 31, 2020, to record the fair value option for the bonds payable.

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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bartleby, a Learneo, Inc. business

	Carrying Amount	Fair Value (at December 31)
Investment in debt securities (intent is to hold to maturity)	$ 40,000	$ 41,000
Investment in Chen Company stock	800,000	910,000
Bonds payable	220,000	195,000