Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31:Year 1Apr. 1. Purchased $90,000 of Smoke Bay 6%, 10-year bonds at their face amount plus accrued interest of $900. The bonds pay interest semiannually on February 1 and August 1.May 16. Purchased $42,000 of Geotherma Co. 4%, 12-year bonds at their face amount plus accrued interest of $70. The bonds pay interest semiannually on May 1 and November 1.Aug. 1. Received semiannual interest on the Smoke Bay bonds.Sept. 1. Sold $12,000 of Smoke Bay bonds at 101 plus accrued interest of $60.Nov. 1. Received semiannual interest on the Geotherma Co. bonds.Dec. 31. Accrued $1,950 interest on the Smoke Bay bonds.31. Accrued $280 interest on the Geotherma Co. bonds.Year 2Feb. 1. Received semiannual interest on the Smoke Bay bonds.May 1. Received semiannual interest on the Geotherma Co. bonds.Instructions1. Journalize the entries to record these transactions.2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?
Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31:
Year 1
Apr. 1. Purchased $90,000 of Smoke Bay 6%, 10-year bonds at their face amount plus accrued interest of $900. The bonds pay interest semiannually on February 1 and August 1.
May 16. Purchased $42,000 of Geotherma Co. 4%, 12-year bonds at their face amount plus accrued interest of $70. The bonds pay interest semiannually on May 1 and November 1.
Aug. 1. Received semiannual interest on the Smoke Bay bonds.
Sept. 1. Sold $12,000 of Smoke Bay bonds at 101 plus accrued interest of $60.
Nov. 1. Received semiannual interest on the Geotherma Co. bonds.
Dec. 31. Accrued $1,950 interest on the Smoke Bay bonds.
31. Accrued $280 interest on the Geotherma Co. bonds.
Year 2
Feb. 1. Received semiannual interest on the Smoke Bay bonds.
May 1. Received semiannual interest on the Geotherma Co. bonds.
Instructions
1.
2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?
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