S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds had a fair value of $873,000. What pretax amounts did S&L include in its 2021 and 2022 net income as a result of this investment (ignoring interest)?
Q: Swifty holds bonds issued by Dorsel Corp. The bonds have an amortized cost of $316,000 and their…
A: Journal Entry: Journal entry is the book of original entry where first transactions are recorded in…
Q: to the text On July 1, 2020, Kabir Company, a private company, decided to buy $283,000, 3% 13-year…
A: The bonds are the financial instruments used to raise money from the market or for other investment…
Q: On July 1, 2020, an interest date, P1,000,000 of Siomai Company bonds were converted into 20,000 of…
A: Conversion of bonds refers to the process of exchanging a convertible type of asset or bond into…
Q: On February 18, 2021, Union Corporation purchased 600 IBM bonds as a long-term investment at their…
A: 1) These bonds are classified under available for sale for sale investment as these are held for…
Q: Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term…
A: Bonds: Bonds indicate fixed-income financial instruments issued by Corporates, any government, and…
Q: On July 1, 2021, Darrell Company purchased as debt investments at fair value through profit or loss,…
A: The answer is given below. Explanation: At the end of year on 31st December 2021 company record the…
Q: On January 1, 2019, Odeng Company purchased P1,000,000, 12% bonds of Myeongdong Company for P1,063,…
A: The bond is an investment security which are issued by the large organisation in order to raise…
Q: On May 1, 2020, GAL Co. purchased a short-term P2,000,000 face value, 9% debt instruments for…
A: Debt instruments: It is the instrument issued by the company to take loan. Under this instrument…
Q: Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term…
A: The process of recording business transactions in the books of accounts for the first time is…
Q: On Jan. 1, 2021, an entity bought an investment in bonds with a face value of P3,000,000 for…
A: “Since you have asked multiple sub-parts, we will solve the first three sub-parts for you. If you…
Q: On February 18, 2021, Union Corporation purchased 1,056 IBM bonds as a long-term investment at their…
A: Adjusting Entry:- The adjusting entry are prepared at the end of the particular period when…
Q: ts in common stock of Laser Company $1,430,000 Investment in debt securities of FourSquare Company…
A: Answer a) Date Account And Explanation Debit Credit 31 Dec,2021 Loss on impairment…
Q: Husky Corporation is a general contractor which occasionally invests excess cash in debt securities.…
A: Journal Entries in the book of Accounts of Husky Corporation. Date Particulars Ref. Debit ($)…
Q: On July 1, 2020, COC Company purchased P500,000 face value of ML Company's 8% bonds for P455,000…
A: The question is based on the concept of Financial Accounting.
Q: Kingbird Company has the following investments as of December 31, 2020: Investments in common…
A:
Q: In 2021, Cromwell Corporation purchased bonds of Oliver Company at par for $300,000 and classified…
A: GIVEN: On 2021 Purchases of bonds = $300000 In 2022 market value of bonds increased to $320000 In…
Q: S&L Financial buys and sells securities that it typically classifies as available-for-sale. On…
A: As the fair value of bond is smaller than the purchase price $2000 will be loss in 2018. Also as the…
Q: Tanner Co. acquired $120,000 of 6% bonds, dated July 1, on July 1, 2021 by paying $100,000. Tanner…
A: Journal:- These are prepared by the companies with debit and credit sides in order to match the…
Q: During 2021 Nice Company experienced financial difficulties and is likely to default on a P500,000,…
A: calculation of gain from the debt restructuring are as follows
Q: On January 1, 2020, the Deluxe Corporation purchased equity securities to be held for trading…
A: Given, Acquisition cost of securities = P 2,000,000 Commission and taxes = P 50,000 Fair value of…
Q: On July 1, 2020, Sprakenheit Company purchased P500,000 face value Swazzeg Company 8% bonds for…
A: Bonds: Bonds are one of the main debt sources of raising funds from the public. Company issue bonds…
Q: Gentiles Company is indebted to Israelites under a P1,000,000, 9% three-year bonds dated December…
A: Bonds are one of the type of long-term debt generally issued by companies. The issuer of bonds pays…
Q: On May 1, 2020, GAL Co. purchased a short-term P2,000,000 face value, 9% debt instruments for…
A: Income statement: The financial statement which reports revenues and expenses from business…
Q: Beresford Inc. purchased several investments in debt securities during 2020, its first year of…
A: Introduction: A balance sheet is one of the financial statements that cover the assets, liabilities,…
Q: Tanner-UNF Corporation acquired as an investment $240 million of 5% bonds, dated July 1, on July 1,…
A: Investment in bonds is a form of asset for the company. Any changes in the fair value of the bonds…
Q: On May 1, 2019, LAG Co. purchased a short-term P2,000,000 face value, 9% debt instruments for…
A: Given, Purchases = P 1,860,000 Face Value = P 2,000,000 Fair value = 98%
Q: On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for…
A: Where investment are classified as FVTPL, then initially the investments are recorded Fair Value .…
Q: On January 1, 2021, Mega Corporation purchased P1,000,000, 12% bonds for P1,065,000, a price that…
A: Introduction: Debt funds invest in assets that provide fixed interest, such as corporate bonds,…
Q: On January 1, 2020, the Gim Corporation purchased equity securities for P2,000,000. The company also…
A: The investment in financial securities can be reported as trading security, held to maturity…
Q: S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27,…
A: The unrealized gain on the bond investment is recognized through OCI, and on derecognition of…
Q: Pharoah Company purchased $3200000 of 9%, 5-year bonds from Wildhorse, Inc. on January 1, 2021, with…
A: The question is based on the concept of Financial Accounting.
Q: On May 1, 2020, GAL Co. purchased a short-term P2,000,000 face value, 9% debt instruments for…
A: The recognized net income is income that is received to the organization and the net income as…
Q: In 2021, a company issued 6% bonds with a maturity value of P40,000, together with 1,000 shares of…
A: Increase in share premium as a result of this transaction will be Amount allocated to ordinary…
Q: On 1 January 2021, SR Bhd (SRB) purchases two quoted securities from the open market. The details of…
A:
Q: Landis Co. purchased €500,000 of 8%, 5-year bonds from Ritter, Inc. on January 1, 2021, with…
A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…
Q: S&L Financial buys and sells securities expecting to earn profits on short-term differences in…
A: As the fair value of the bond is smaller than the purchase price $2000 will be loss in 2018. Also as…
Q: On July 1, 2021, Darrell Company purchased as debt investments at fair value through profit or loss,…
A: As per conservatism principle we can anticipate losses and provide for it but we…
Q: 2021, a company issued 6% bonds with a maturity value of P40,000, together with 1,000 shares of its…
A: Share premium is amount which is paid in excess of par value of ordinary shares. It is given that…
Q: Penta Company purchased 1,000 bonds of Gone Company in 2018 for $810 per bond and classified the…
A: In 2019 Purchase Price = $810 Value as on 31st Dec, 2019 = $272 Unrealized Holding Loss =($810 -…
Q: Flint Company invests $10,000,000 in 6% fixed rate corporate bonds on January 1, 2020. All the bonds…
A: Available for sale instruments are recorded initially at the purchase price. However, this is…
Q: On January 1, 2020, Trisha Company received P1,077,200 for 12% bonds with face amount of P1,000,000.…
A: AMOUNT RECEIVED 1077200. FACE VALUE 1000000 RATE OF INTEREST 12%
Q: Goofy Inc. bought a sizeable amount of Crazy Co.'s bonds for $205,000 on May 5, 2020, and classified…
A: Initially bond are classified as investment held for sale. On December 31, 2020 that is the…
Q: n January 1, 2019, Odeng Company purchased P1,000,000, 12% bonds of Myeongdong Company for P1,063,…
A: Date Interest Collected Interest Income Amortization Carrying Amount 1/1/2019…
Q: S&L Financial buys and sells securities expecting to earn profits on short-term differences in…
A: For 2016:
Q: On June 1, 2021, VIXEN Company received ₱1,077,200 plus accrued interest for 12% bonds with face…
A: Interest on bond will be provided at face value at the rate for which bond is issued . Accrued…
Q: On its December 31, 2021 statement of financial position, Emig Corp. reported bonds payable of…
A: Lets understand the basics. For determining extinguishment of debt, we need to use below formula.…
Q: n July 1, 2021, Young Company purchased at fair value through profit or loss P500,000 face value 8%…
A: Explanation of Concept Bond is that debt instrument which is used by the organisation to finance…
Q: S&L Financial buys and sells securities which it classifies as available-for-sale. On December…
A: Answer: 2018: No Gain/Loss in earnings For Available for sale securities, unrealized holding gains…
Q: On January 1, 2020, the Gim Corporation purchased equity securities for P2,000,000. The company also…
A: Unrealized Gain / (Loss) = Fair Value - Cost of Investment
S&L Financial buys and sells securities expecting to earn profits on short-term differences in price. On December 27, 2021, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2022, for $880,000. At December 31, the bonds had a fair value of $873,000. What pretax amounts did S&L include in its 2021 and 2022 net income as a result of this investment (ignoring interest)?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- A company purchases debt securities for $100,000 at the beginning of 2022. It classifies as trading securities and $60,000 as AFS securities. It sells the securities in 2023. Required For each of the following scenarios, indicate the net effect on income and other comprehensive income in each year 2022 and 2023. In each case, any unrealized decline in value below cost is expected to be recovered and is attributed to market factors. a. Fair value, end of 2022 Selling price, 2023 Note: Use a negative sign with an answer to indicate the net effect amount decreases Income or OCI. OCI End of 2022 $ 2023 b. Trading securities AFS securities $38,000 $65,000 43,000 64,000 Income Fair value, end of 2022 Selling price, 2023 End of 2022 $ 2023 (2,000)✓ $ 9,000 ✓ Trading securities AFS securities $45,000 $56,000 42,000 68,000 Note: Use a negative sign with an answer to indicate the net effect amount decreases Income or OCI. OCI (4,000) ✔ 0 x 5,000 ✓ 0 x Income 5,000 $ 5,000 ✓On February 18, 2021, Union Corporation purchased 600 IBM bonds as a long-term investment at their face value for a total of $600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $580,000 and $610,000, respectively.Required:1. What is the appropriate reporting category for this investment? Why?2. Prepare the adjusting entry for December 31, 2021.3. Prepare the adjusting entry for December 31, 2022.The balance sheet at December 31, 2021, for Nevada Harvester Corporation Includes the liabilitles listed below: a. 10% bonds with a face amount of $42 million were Issued for $42 million on October 31, 2012. The bonds mature on October 31, 2032. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2022, at a redemption price of $42 million. Market conditions are such that the call is not expected to be exercised. b. Management Intended to refinance $8.7 million of Its 9% notes that mature In May 2022. In early March, prior to the actual issuance of the 2021 financial statements, Nevada Harvester negotlated a line of credit with a commercial bank for up to $6.5 million any time during 2022. Any borrowings wll mature two years from the date of borrowing. C. Noncallable 10% bonds with a face amount of $18.2 million were issued for $18.2 million on September 30, 2002. The bonds mature on September 30, 2022. Sufficient cash is expected to be avallable to…
- On February 18, 2021, Union Corporation purchased 1,056 IBM bonds as a long-term investment at their face value for a total of $1,056,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,024,000 and $1,072,000, respectively. Required:2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the adjusting entry for December 31, 2021. Record the adjusting entry for December 31, 2022.Metlock Corporation has the following trading portfolio of debt investments as of December 31, 2020. Security Cost A $16,340 B 18,920 C (a) 29,240 $64,500 (b) Fair Value $12,900 On January 22, 2021, Metlock Corporation sold security C for $27,520. List of Accounts 23,220 Prepare the adjusting entry for Metlock Corporation on December 31, 2020, to report the portfolio at fair value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.) Save for Later 24,940 $61,060 eTextbook and Media Date Account Titles and Explanation Dec. 31 METLOCK CORPORATION Balance Sheet (Partial) METLOCK CORPORATION Income Statement (Partial) Debit Indicate the balance sheet and income statement presentation of the fair value data for Metlock Corporation at December 31, 2020. $ Credit Attempts: unlimited Submit AnswerAI Tool and Dye issued 8% bonds with a face amount of $160 million on January 1, 2021. The bonds sold for $150 million. For bonds of similar risk and maturity the market yield was 9%. Upon issuance, AI elected the option to report these bonds at their fair value. On June 30, 2021, the fair value of the bonds was $145 million as determined by their market value on the NASDAQ. Will AI report a gain or will it report a loss when adjusting the bonds to fair value? If the change in fair value is attributable to a change in the interest rate, did the rate increase or decrease? Will the gain or loss be reported in net income or as OCI?
- CBRE Group purchased 10,000 Dover Corporation bonds in 2018 for $59 per bond and classified the investment as securities available-for-sale. Dover bonds have a 6% coupon rate. The value of the Dover investment was $83 per bond on December 31, 2019, and $92 per bond on December 31, 2020. During 2021, CBRE sold all of its Dover investment at $150 per bond. In its 2021 income statement, CBRE would report as unrealized gains/losses: Multiple Choice A gain of $910,000. A gain of $580,000. A gain of $330,000, A gain of $1,240,000. O O OOn December 31, 2020, Alberta Inc. purchased $500,000, 10% bonds issued by Banff Ltd. The bonds have a maturity date of December 31, 2026. The market interest rate on December 31, 2020 was 9.5%. If Alberta Inc. accounts for this investment under the amortized cost model, what is the amount at which the Investment in Banff Ltd. Bonds will be reported on the statement of financial position at December 31, 2021, given that the current market interest rate is 9%? $519,448 $509,599 $511,050 $490,523S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27, 2018, S&L purchased Coca-Cola bonds at par for $875,000 and sold the bonds on January 3, 2019, for $880,000. At December31, the bonds had a fair value of $873,000, and S&L has the intent and ability to hold the investment until fair valuerecovers. What pretax amounts did S&L include in its 2018 and 2019 net income as a result of this investment?
- On January 1, 2021, Jason Corp. purchased 5-year bonds with a face value of P10,000,000 and a stated interest rate of 12% per year collectible every December 31. The bonds were acquired to yield 11%. These bonds were classified based on business model of collecting contractual cash flows and to sell. On December 31, 2021 and December 31, 2022, the bonds were quoted at 104 and 102, respectively. At what amount should the investment be reported in its December 31, 2022 statement of financial position? Group of answer choices P10,200,000 P10,400,000 P10,000,000 P10,150,000On February 18, 2021, Union Corporation purchased 1,311 IBM bonds as a long-term investment at their face value for a total of $1,311,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,273,000 and $1,330,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for aCurri, Incorporated sold its 5% bonds with a maturity value of $1,000,000 on August 1, 2021. Investors in the market purchased the bonds for $1,044,915 a price which would earn them a 4% yield on their investment. The difference between the stated and market rates was attributed to revised inflation expectations. The bonds mature on August 1, 2026 and pay interest semi-annually on August 1 and February 1. The bonds are callable at any time after August 1, 2023. Required: C) Assume that Curri was unable to make the required interest payment on February 1, 2023. (NOTE: This assumption should not change your responses to items A) and B) above). The bondholders agreed to accept $800,000 of 2% bonds from Curri in full satisfaction of all claims relating to the 5% bonds. The 2% bonds mature on August 1, 2027 and require interest to be paid quarterly. On February 2, 2023 the 2% bonds were trading in the bond market at 77. How should Curri report the February 1, 2023 swap of the 2% bonds for…