Question

Marketable Debt Securities
Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable debt securities classified as available-for-sale securities. Assume that these transactions occur in 2016 (before the new rules for securities went into effect).

a. Loudder Inc. purchases 8,000 bonds with a face value of $1,000 per bond. The bonds are purchased at par for cash and pay interest at a semi-annual rate of 4%.
b. Loudder receives semi-annual cash interest of $320,000.
c. Year-end fair value of the bonds is $978 per bond.
d. Shortly after year-end, Loudder sells all 8,000 bonds for $970 per bond.

Use negative signs with answers, if appropriate.                         

				Balance Sheet								Income Statement
			Noncash				Contrib.		Earned
Transaction	Cash Asset	+	Assets	=	Liabilities	+	Captial	+	Capital		Revenues	-	Expenses	=	Net income
Loudder purchases bonds.	Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer
Loudder receives cash interest.	Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer
Bonds year-end fair value is determined.	Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer
Loudder sells all bonds	Answer		Answer		Answer		Answer		Answer		Answer		Answer		Answer

Answer 1

Loudder Inc. Balance sheet Income Statement =Net Income Cash Asset Non Cash Asset = Liabilities Contributed CapitalEarned Capital Revenue Trans. Expenses -8000000 8000000 0 а. + + b. 320000 320000 320000 320000 -176000 -176000 0 C. + + d. 7760000 -7824000 -64000 240000 -240000 + 17600064000 240000