# Accy 112 Ex 12-1,5

 .remove_background_ad { border: 1px solid #555555; padding: .75em; margin: .75em; background-color: #e7e7e7; } .rmbg_image { max-height: 80px; } Purchasing long term bonds is classified as HTM 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 Journal entry for Interest Year End 6% stated rate 8% market rate Purchase cost \$200 240 bonds Dec 31Cash...............7.2 (face x stated)Disc on Bond....  .8       Interest revenue.....8 (statedx purch price) 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 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. 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   240Disc adjusted 40-.8           39.2Amortized amount listed on balance sheet                                     200.8 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. Sell of bond for \$190 6% stated rate 8% market rate Purchase cost \$200 240 bonds Cash ........................190Loss on investment......10.8Disc on bond inv.........39.2      inv in LT bonds..............240 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 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 17Inv in Grocers Corp pref shares    350000       cash                                        350000Dec 28cash............2000      investment revenue.....2000Dec 31fair value adjust.........50000      net unrealized gain/loss ......500002014Jan 5 Cash.....................395000       gain on investment.............45000       inv in grocers....................350000*** Statement of cash flows:350000 inflow purch price2000 dividend(operating)***Balance Sheet 2013 year endinc fair value changes in security 400000***Income statement 2013inv rev 2000net unrealized gain 50000unrealized gain/loss are relevant in the income statement. AuthorSusanneS28 ID235601 Card SetAccy 112 Ex 12-1,5 DescriptionAccy 112 Ex 12-1,5 Updated2013-09-18T17:06:51Z Show Answers