At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities (all of which were acquired at par value):
| Company | Amortized Cost | 12/31/18 Fair Value | Cumulative Change in Fair Value |
| Morgan Company | $35,000 | $34,200 | $(800) |
| Nance Company | 60,000 | 63,200 | 3,200 |
| Totals | $95,000 | $97,400 | $2,400 |
During 2019, the following transactions occurred:
| July 1 | Purchased Oscar Company debt securities with a par value of 100,000 for $97,000. The securities carry an annual interest rate of 10%, mature on December 31, 2021, and pay interest seminannually on July 1 and December 31. Terry uses the straight-line method to amortize any discounts or premiums. |
| Oct. 11 | Sold all of the Morgan Company securities for $33,000 plus interest of $1,400. |
| Dec. 31 | Received interest of $6,000 on the Nance Company and Oscar Company debt securities, and the following yearend total market values were available: Nance Company debt securities, $64,000; Oscar Company debt securities, $95,200. |
Required:
| 1. | Prepare journal entries to record the preceding information. |
| 2. | Show how the preceding items are reported on Terry’s December 31, 2019, balance sheet. Assume all investments are non-current. |
Homework Answers
Part 1
|
Date |
Account title |
Debit |
Credit |
|
Dec. 31 |
Cash |
6000 |
|
|
Investment in available-for-sale securities ((100000-97000)/2.5*6/12) |
600 |
||
|
Interest income |
6600 |
||
|
Dec. 31 |
Unrealized Holding Gain/Loss:Available-for-Sale Securities (64000+95200)-(60000+(97000+600))-2400+800 |
0 |
|
|
Allowance for Change in Fair Value of Investment |
0 |
Part 2
|
TERRY COMPANY Partial Balance Sheet December 31, 2019 |
|
|
Noncurrent assets: |
|
|
Investment in available-for-sale securities |
157600 |
|
Allowance for Change in Fair Value of Investment |
1600 |
|
159200 |
|
|
Shareholders’ Equity: |
|
|
Unrealized Holding Gain/Loss:Available-for-Sale Securities |
0 |
(64000+95200)-(60000+(97000+600)) = 159200
Add Answer to:
At the end of 2018, Terry Company prepared the following
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At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities (all of which were acquired at par value): Company Amortized Cost 12/31/18 Fair Value Cumulative Change in Fair Value Morgan Company $35,000 $34,200 $(800) Nance Company 60,000 63,200 3,200 Totals $95,000 $97,400 $2,400 During 2019, the following transactions occurred: July 1 Purchased Oscar Company debt securities with a par value of 100,000 for $97,000. The securities carry an annual interest rate of 10%,...
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