Question

Accounting Principles Homework Problems Chapter 16 1. Mickelson Inc. provides financing and capital to the assisted living industry. The following selected transactions relate to bonds acquired as an investment by Mickelson, which has a December 31 fiscal year end. 2020 Jan. 1 Purchased at face value $3,000,000 of Ash Nursing Home, Inc., 10 year, 8% bonds dated January 1, 2020, directly from Ash. July 1 Received the semiannual interest on the Ash bonds. Dec. 31 Accrued interest at year-end on the Ash bonds. (Now assume that all of the necessary transactions were made correctly for 2016 and 2017 and that the number of bonds owned has not changed.) 2023 Jan. 1 Received the semiannual interest on the Ash bonds. Jan. 1 Sold $1,000,000 Ash bonds at 106. July 1 Received the semiannual interest on the Ash bonds. Dec. 31 Accrued interest at year-end on the Ash bonds. Instructions a. Journalize the above transactions for 2020 and 2023. b. Assume that the fair value of the bonds on December 31, 2020 was $3,200,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value.

Answer 1

for 2020 and 2023 2022 30,00,000 in can Journalike the above transactions Aagwan Journal entairs for 2020 and Jan I 84. Ash Bonde Ale Dr Т. В. hе (Being purchase of 8t. bonds , & 2020 30,00.000 120,000 1,20,000 Bank Al T To Internt Income) Ale (Being Interest received Csemiannual) I for 6 months on Bt. teh Bonds) Jan 2023 1,20,000 Dec 31, Interest Receivable Ale 1. To Intament al (Income) (Being Interent accrued at year end on the Ash Bondes) Jan, 10, 60,000 2023 Bank Are To 8d. Ash Bonds To Income ona Bonds Being 84. Ash Bonde sold 10,00,000 60.000 the Ale at $106) Jul i 800 2023 I Bank Al To Intenent Al 9 Interat received (Bemi annuel) o month on 8t. A od Bonds of $ 20.00000 Dec, 31, 80,000 Interest Receivable de To Interest Al (Income) Al Being Accrued interest at year and SOOCO

(b) I Assume that the fair value of Bondo on December 31, 2020 was $3200000. There Bonds are clanrified as available for sale securities. Prepare the adjunting entry to record There Bonde at fair value. - (Amounts in $) 1 84. Ash Bonde Ale so 2,00.000 To Income on Bonds Ale (Being adjunting entry posted to record sto Ash Bonds Dec, 31 2020 2,00,000 ܐܫܠܝ .ܝܽܘܛ }. ܝܘ ܘܘܙܘܘ32 % Dec 31, 2020)