Question

PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE. THANK YOU!

Exercise 12-26 (Algo) Fair value option; available-for-sale Investments [LO12-2, 12-3, 12-8] Colah Company purchased $2,400,000 of Jackson, Inc., 6% bonds at their face amount on July 1, 2021, with Interest pald semi- annually. The bonds mature in 20 years but Colah planned to keep them for less than 3 years, and classified them as available for sale Investments. When the bonds were acquired Colah decided to elect the fair value option for accounting for its Investment. At December 31, 2021, the Jackson bonds had a fair value of $2.740.000. Colah sold the Jackson bonds on July 1, 2022 for $2.160,000. a. The purchase of the Jackson bonds on July 1. b. Interest revenue for the last half of 2021. C. Any year-end 2021 adjusting entries d. Interest revenue for the first half of 2022 e. Any entry or entries necessary upon sale of the Jackson bonds on July 1, 2022 Required: 1. Prepare Colah's Journal entries for above transactions. 2 Complete the following table to show the effect of the Jackson bonds on Colah's net income, other comprehensive Income, and comprehensive Income for 2021, 2022, and cumulatively over 2021 and 2022 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare Colah's journal entries for above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction lat Journal entry worksheet Record the purchase of the Jackson bonds on July 1. Note: Enter debits before credits General Journal Debit Credit Date July 01, 2021 Record entry Clear entry View general Journal Required 1 Required 2 >

Answer 1

Please find below table useful to compute desired results: -

Journal Entry Account titles and explanation Investment in Bonds Debit Credit 2 Date 2400000 3 Jul 1 2021 2400000 Cash 4 (to record the purchase of the jackson bonds) 6 Dec 31 2021 Cash =C3*6%/2 |=C6 Interest Revenue (to record the interest revenue for the last half) 9 Dec 31 2021 Fair Value adjustment =2740000-2400000 =2740000-2400000 Gain on investment-Unrealized 10 (to record the adjustment entry) 11 12 Jun 30 2022 Cash =C3*6%/2 |=C12 Interest Revenue 13 (to record the interest revenue for the first half) Loss on investment - Unrealized Fair value adjustment (to record the unrealized loss) Cash Fair value adjustment 14 =2740000-2160000 15 Jul 1 2022 =2740000-2160000 16 17 2160000 |=D20-C18 18 Jul 1 2022 19 |=C3 Investment in Bonds 20 (to record the sale of Jackson bonds) 21 22 Year 2021 |=D7+D10 Year 2022 |=D13-C15 Total |=C24+D24 23 Part 2 Net Income lOCI 24 25 =C24+C25 =D24+D25 =E24+E25 Comprehensive Income 26

End results would be as follows: -

Journal Entry Account titles and explanation Investment in Bonds Debit Credit 2 Date 3 Jul 1 2021 $2,400,000 |$2,400,000 Cash (to record the purchase of the jackson bonds) 6 Dec 31 2021 Cash $72,000 $72,000 Interest Revenue |(to record the interest revenue for the last half) 9 Dec 31 2021 Fair Value adjustment $340,000 Gain on investment-Unrealized S340,000 10 (to record the adjustment entry) 11 12 Jun 30 2022 Cash $72,000 Interest Revenue (to record the interest revenue for the first half) Loss on investment - Unrealized Fair value adjustment (to record the unrealized loss) $72,000 13 14 15 Jul 1 2022 $580,000 $580,000 16 17 18 Jul 1 2022 $2,160,000 Cash Fair value adjustment $240,000 19 Investment in Bonds $2,400,000 20 (to record the sale of Jackson bonds) 21 22 Year 2022 Total $412,000 (S508,000) (S96,000) SO $412,000 (S508,000) ($96,000) Year 2021 23 Part 2 Net Income 24 SO sO OCI 25 Comprehensive Income 26