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Category > Accounting Posted 19 Aug 2017 My Price 7.00

Rekya Mart Inc

PR 13-1b Debt investment transactions, available-for-sale valuation              ObJ.  2,  4

Rekya Mart Inc. is a general merchandise retail company that began operations on Janu- ary 1, 2016. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31:


 

 

 

2016

Apr. 1. Purchased $90,000 of Smoke Bay 6%, 10-year bonds at their face amount plus accrued interest of $900. The bonds pay interest semiannually on February 1 and August 1.

May 16.  Purchased $42,000 of Geotherma Co. 4%, 12-year bonds at their face amount plus accrued interest of $70. The bonds pay interest semiannually on May 1 and November 1.

Aug.   1.   Received semiannual interest on the Smoke Bay bonds.

Sept. 1. Sold $12,000 of Smoke Bay bonds at 101 plus accrued interest of $60. Nov.   1.  Received semiannual interest on the Geotherma Co. bonds.

Dec. 31.   Accrued $1,950 interest on the Smoke Bay bonds.

31.  Accrued $280 interest on the Geotherma Co. bonds.

2017

Feb.   1.   Received semiannual interest on the Smoke Bay bonds. May 1. Received semiannual interest on the Geotherma Co. 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?

 

 

 
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1 Approved Answer

 
 
Nandini D

1262 answers so far

 
 
Answer: 1) Date Particulars Debit Credit 2016 1-April Investment 90,000 Accrued Interest 900 To Cash 90,900 16-May Investment 42000 Accrued interest 70 To Cash 42070 1-Aug cash 2700 To Accrued Interest 900 To Interest Income 1800 (90,000*6%*6/12) 1-Sept Accrued interest 60 To Interest Income 60 1-Sept cash 12180 To Investment 12000 To Profit on sale of investment 120 To Accrued interest 60 1-Nov Cash 840 To Accrued interest 70 To Interest Income 770 31-Dec Accrued Interest 1950 To Interest Income 1950 31-Dec
 
 
 

 

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