Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31:Year 1Apr. 1. Purchased $100,000 of Welch Co. 6%, 15-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on March 1 and September 1.June 1. Purchased $210,000 of Bailey 4%, 10-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on May 1 and November 1.Sept. 1. Received semiannual interest on the Welch Co. bonds.30. Sold $40,000 of Welch Co. bonds at 97 plus accrued interest of $200.Nov. 1. Received semiannual interest on the Bailey bonds.Dec. 31. Accrued $1,200 interest on the Welch Co. bonds.31. Accrued $1,400 interest on the Bailey bonds.Year 2Mar. 1. Received semiannual interest on the Welch Co. bonds.May 1. Received semiannual interest on the Bailey bonds.Instructions 1. 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?
Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31:
Year 1
Apr. 1. Purchased $100,000 of Welch Co. 6%, 15-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on March 1 and September 1.
June 1. Purchased $210,000 of Bailey 4%, 10-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on May 1 and November 1.
Sept. 1. Received semiannual interest on the Welch Co. bonds.
30. Sold $40,000 of Welch Co. bonds at 97 plus accrued interest of $200.
Nov. 1. Received semiannual interest on the Bailey bonds.
Dec. 31. Accrued $1,200 interest on the Welch Co. bonds.
31. Accrued $1,400 interest on the Bailey bonds.
Year 2
Mar. 1. Received semiannual interest on the Welch Co. bonds.
May 1. Received semiannual interest on the Bailey 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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