Transactions for Bond (Held-to-Maturity) Investments Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, 20Y5. The following are bond (held-to-maturity) transactions by Rekya Mart Inc., which has a fiscal year ending on December 31: 20YS Purchased $36,000 of Smoke Bay 5%, 10-year bonds at their face amount plus accrued Interest of $300. The bonds pay interest semiannually on February 1 and August 1. Purchased $114,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $285. The bonds pay interest semiannually on May 1 and November Apr. 1 May 16. Aug. 1. Received semiannual interest on the Smoke Bay bonds. Sept. Sold $14,400 of Smoke Bay bonds at 103 plus accrued interest of $60. 1. Nov. 1. Recelved semiannual Interest on the Geotherma Co. bonds. Dec. 31 Accrued interest on the Smoke Bay bonds. Dec. 31 Accrued interest on the Geotherma Co. bonds. 20Y6 Feb. 1. Received semiannual interest on the Smoke Bay bonds. May 1. Received semiannual interest on the Geotherma Co. bonds. Required: 1. Journalize the entries to record these transactions. If an amount box does not require an entry, leave it blank. Do not round your intermediate calculations and round final answers to the nearest dollar. Use the nearest whole month for the interest period.
Transactions for Bond (Held-to-Maturity) Investments Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, 20Y5. The following are bond (held-to-maturity) transactions by Rekya Mart Inc., which has a fiscal year ending on December 31: 20YS Purchased $36,000 of Smoke Bay 5%, 10-year bonds at their face amount plus accrued Interest of $300. The bonds pay interest semiannually on February 1 and August 1. Purchased $114,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus accrued interest of $285. The bonds pay interest semiannually on May 1 and November Apr. 1 May 16. Aug. 1. Received semiannual interest on the Smoke Bay bonds. Sept. Sold $14,400 of Smoke Bay bonds at 103 plus accrued interest of $60. 1. Nov. 1. Recelved semiannual Interest on the Geotherma Co. bonds. Dec. 31 Accrued interest on the Smoke Bay bonds. Dec. 31 Accrued interest on the Geotherma Co. bonds. 20Y6 Feb. 1. Received semiannual interest on the Smoke Bay bonds. May 1. Received semiannual interest on the Geotherma Co. bonds. Required: 1. Journalize the entries to record these transactions. If an amount box does not require an entry, leave it blank. Do not round your intermediate calculations and round final answers to the nearest dollar. Use the nearest whole month for the interest period.
Financial Accounting Intro Concepts Meth/Uses
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ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter13: Marketable Securities And Derivatives
Section: Chapter Questions
Problem 13E
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Transcribed Image Text:Transactions for Bond (Held-to-Maturity) Investments
Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, 2OY5. The following are bond (held-to-maturity) transactions by Rekya Mart Inc., which has a fiscal year ending on December 31:
20Y5
Apr. 1. Purchased $36,000 of Smoke Bay 5%, 10-year bonds at their face amount plus accrued
interest of $300. The bonds pay interest semiannually on February 1 and August 1.
Purchased $114,000 of Geotherma Co. 6%, 12-year bonds at their face amount plus
accrued interest of $285. The bonds pay interest semiannually on May 1 and November
May
16.
1.
Aug. 1. Received semiannual interest on the Smoke Bay bonds.
Sept.
Sold $14,400 of Smoke Bay bonds at 103 plus accrued interest of $60.
1.
Nov. 1. Received semiannual interest on the Geotherma Co. bonds.
Dec. 31 Accrued interest on the Smoke Bay bonds.
Dec. 31 Accrued interest on the Geotherma Co. bonds.
20Y6
Feb. 1. Received semiannual interest on the Smoke Bay bonds.
May 1. Received semiannual interest on the Geotherma Co. bonds.
Required:
1. Journalize the entries to record these transactions. If an amount box does not require an entry, leave it blank. Do not round your intermediate calculations and round final answers to the nearest dollar. Use the nearest whole month for the interest period.
Date
Description
Debit
Credit
20Y5
Apr. 1.
Investments-Smoke Bay
36,00
Interest Receiva -
300
Cash
36,300
May 16.
Investments-Geotherma Cr
114,0
Interest Receiva -
285
Cash
114,2
Aug. 1.
Cash
900
Interest Receiva
300
Interest Reven -
600
Sept. 1.
Cash
14,89
Interest Reven -
60
Gain on Sale of Invest
432
Investments-Smoke Bay -
14,400
Nov. 1.
Cash
Interest Receiva
Interest Reven
Transcribed Image Text:Apr. 1.
mvestmeILS STORE bay
36,00
Interest Receiva
300
Cash
36,30
May 16.
Investments-Geotherma C
114,0
Interest Receiva
285
Cash
114,21
Aug. 1.
Cash
900
Interest Receiva
300
Interest Reven
600
Accounting numeric field
Sept. 1.
Cash
14,89
Interest Reven •
60
Gain on Sale of Inves -
432
Investments-Smoke Bay
14,40
Nov. 1.
Cash
Interest Receiva
Interest Reven
Dec. 31 Smoke
Bay
Interest Receiva
Interest Reven •
Dec. 31
Geotherma Co.
Interest Receiva
Interest Reven
20Y6
Feb. 1.
Cash
540
Interest Receiva
Interest Reven
May 1.
Cash
Interest Receiva -
Interest Reven
2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?
If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be adjusted to fair value - . This would be recorded by using a valuation allowance account and an unrealized gain ( account.
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