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Accy 112 Ex 12-1,5

  1. Purchasing long term bonds is classified as
    HTM
  2. Journal entry for Purchase
    6% stated rate
    8% market rate
    Purchase cost $200
    240 bonds
    • Inv in LT bonds.....240
    •      Disc on bond...........40
    •      Cash......................200
  3. Journal entry for Interest Year End
    6% stated rate
    8% market rate
    Purchase cost $200
    240 bonds
    • Dec 31
    • Cash...............7.2 (face x stated)
    • Disc on Bond....  .8
    •        Interest revenue.....8 (statedx purch price)
  4. What is the cash value debited to for the year end interest for HTM bonds?
    Face value of the bond x the stated rate of the bond
  5. What is the interest revenue on the bond for the year end interest calculations
    purchase price of the bond x market rate of the bond.
  6. What will the balance sheet look like
    6% stated rate
    8% market rate
    Purchase cost $200
    240 bonds
     
    Interest revenue 8, disc on bond .8, cash 7.2
    • Investment in LT Bonds   240
    • Disc adjusted 40-.8           39.2
    • Amortized amount listed on balance sheet
    •                                      200.8
  7. Calculation for balance sheet entry for HTM bonds
    • 1. face value -
    • 2. adjusted disc (disc-disc on bond interest 40-.08 year end adjustment)
    • 3. Subtract 1-2 to come up with amortized figure.

    ** always reported at the amortized amount on the balance sheet for HTM securities not at fair value because of their intention to hold the security Long Term.
  8. Sell of bond for $190
    6% stated rate
    8% market rate
    Purchase cost $200
    240 bonds
    • Cash ........................190
    • Loss on investment......10.8
    • Disc on bond inv.........39.2
    •       inv in LT bonds..............240
  9. Statement of cash flow entry
    6% stated rate
    8% market rate
    Purchase cost $200
    240 bonds
    200 million face - cash flows

    *** always regarded as Investment activity on the statement of cash flows because held long term
  10. Journalize
    2013                
    Dec 17    Purchased 100,000 Grocer’s Supply Corporation preferred shares for $350,000.                       
           28    Received cash dividends of $2000 from Grocer’s Supply Corporation preferred shares. 
           31    Recorded any necessary adjusting entry relating to the Grocers’ Supply Corporation preferred shares. The market price of the stock was $4 per share.               
    2014               
            Jan 5       Sold the Grocer’s Supply Corporation preferred shares for $395,000.
    • Dec 17
    • Inv in Grocers Corp pref shares    350000
    •        cash                                        350000
    • Dec 28
    • cash............2000
    •       investment revenue.....2000
    • Dec 31
    • fair value adjust.........50000
    •       net unrealized gain/loss ......50000
    • 2014
    • Jan 5
    • Cash.....................395000
    •        gain on investment.............45000
    •        inv in grocers....................350000
    • ***
    • Statement of cash flows:
    • 350000 inflow purch price
    • 2000 dividend
    • (operating)
    • ***
    • Balance Sheet 2013 year end
    • inc fair value changes in security 400000
    • ***
    • Income statement 2013
    • inv rev 2000
    • net unrealized gain 50000
    • unrealized gain/loss are relevant in the income statement.
Author
SusanneS28
ID
235601
Card Set
Accy 112 Ex 12-1,5
Description
Accy 112 Ex 12-1,5
Updated

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