According to the requirement of the question, we have to record the adjusting Journal entries to account for each investment for 2018 and 2019.
Solution for Requirement 1.
No. | Date | Accounts Titles and Explanation | Debit ($) | Credit ($) |
1.. | Dec. 31, 2018 | Other-than-temporary impairment Loss -I/S | $240,000 | |
Discount on Bond investment | $240,000 | |||
2. | Dec. 31 , 2018 | Other-than-temporary impairment Loss-OCI | $260,000 | |
Fair Value adjustment - Non credit Loss | $260,000 | |||
3. | Dec. 31, 2018 | No Journal entry required | ||
4. | Dec. 31, 2019 | No Journal entry required |
Solution for Requirement 2:-
No. | Date | Accounts Titles and Explanation | Debit ($) | Credit ($) |
1. | Dec. 31, 2018 | No Journal entry required | ||
2. | Dec. 31, 2018 | No Journal entry required | ||
3. | Dec. 31, 2018 | Net Unrealized holding gains and losses -I/S | $100,000 | |
Fair Value Adjustment | $100,000 | |||
($2,300,000 - $2,200,000) | ||||
4. | Dec. 31, 2019 | Fair Value Adjustment | $500,000 | |
Net Unrealized holding gains and losses - I/S | $500,000 | |||
($2,700,000 - $2,200,000) |
Solution for Requirement 3:-
No. | Date | Accounts Titles and Explanation | Debit ($) | Credit ($) |
1. | Dec.31, 2018 | Other-than-temporary impairment loss - I/S | $225,000 | |
Discount on bond Investment | $225,000 | |||
2. | Dec.31, 2018 | Net Unrealized holding gains and losses-OCI | $575,000 | |
Fair Value Adjustment | $575,000 | |||
3. | Dec.31, 2018 | Fair Value Adjustment | $400,000 | |
Net Unrealized holding gains and losses-OCI | $400,000 | |||
4. | Dec.31,2019 | Fair Value Adjustment | $200,000 | |
Net Unrealized holding gains and losses- OCI | $200,000 | |||
($2,900,000 - $2,700,000) |
Thank you..
10:08 AM Thu Feb 20 437% a Aas 1. Bee Company 5% bonds, purchased at face...
Stewart Enterprises has the following investments, all purchased prior to 2018: Bee Company 5% bonds, purchased at face value, with an amortized cost of $4,000,000, and classified as held to maturity. At December 31, 2018, the Bee investment had a fair value of $3,500,000, and Stewart calculated that $240,000 of the fair value decline is a credit loss and $260,000 is a noncredit loss. At December 31, 2019. the Bee investment had a fair value of $3,700,000, and Stewart calculated...
Stewart Enterprises has the following investments, all purchased prior to 2021: Stewart does not intend to sell any of these investments and does not believe it is more likely than not that it will have to sell any of the bond investments before fair value recovers. Required: For each investment, Prepare the appropriate adjusting journal entries to account for each investment for 2021 and 2022. 1. Bee Company 6% bonds, purchased at face value, with an amortized cost of $4,360,000,...
Stewart Enterprises has the following investments, all purchased prior to 2021: Stewart does not intend to sell any of these investments and does not believe it is more likely than not that it will have to sell any of the bond investments before fair value recovers. Required: For each investment, Prepare the appropriate adjusting journal entries to account for each investment for 2021 and 2022. 1. Bee Company 5% bonds, purchased at face value, with an amortized cost of $4,080,000,...
Bee Company 5% bonds, purchased at face value, with an amortized cost of $4,600,000, and classified as held to maturity. At December 31, 2021, the Bee investment had a fair value of $3,650,000, and Stewart calculated that $540,000 of the fair value decline is a credit loss and $410,000 is a noncredit loss. At December 31, 2022, the Bee investment had a fair value of $3,850,000, and Stewart calculated that $290,000 of the difference between fair value and amortized cost...
Jones Inc. 6% bonds, purchased at face value, with an amortized cost of $3,950,000, and classified as an available-for-sale investment. Because of unrealized losses prior to 2021, the Jones bonds have a fair value adjustment account with a credit balance of $550,000, such that the carrying value of the Jones Investment is $3,400,000 prior to making any adjusting entries In 2021. At December 31, 2021, the Jones Investment had a fair value of $2,850,000, and Stewart calculated that $300,000 of...
Oliver Corporation 4% bonds, purchased at face value, with an amortized cost of $2,950,000, classified as a trading security. Because of unrealized losses prior to 2021, the Oliver bonds have a fair value adjustment account with a credit balance of $350,000, such that the carrying value of the Oliver investment is $2,600,000 prior to making any adjusting entries in 2021. At December 31, 2021, the Oliver investment had a fair value of $2,350,000, and Stewart calculated that $270,000 of the...
Jones Inc. 6% bonds, purchased at face value, with an amortized cost of $3,950,000, and classified as an available-for-sale investment. Because of unrealized losses prior to 2021, the Jones bonds have a fair value adjustment account with a credit balance of $550,000, such that the carrying value of the Jones investment is $3,400,000 prior to making any adjusting entries in 2021. At December 31, 2021, the Jones investment had a fair value of $2,850,000, and Stewart calculated that $300,000 of...
Bloom Corporation purchased $1,750,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they matured in 2025, so Bloom classifies its investment as AFS. Unfortunately, a combination of problems at Taylor Company and in the debt securities market caused the fair value of the Taylor investment to decline to $1,200,000 during 2021. The following are the two alternative scenarios that should be analyzed independent of each other. 1. Bloom now...
Bloom Corporation purchased $1,750,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they matured in 2025, so Bloom classifies its investment as AFS. Unfortunately, a combination of problems at Taylor Company and in the debt securities market caused the fair value of the Taylor investment to decline to $1,200,000 during 2021. The following are the two alternative scenarios that should be analyzed independent of each other. Bloom now believes...
Exercise 12-3 Bloom Corporation purchased $1,900,000 of Taylor Company 5% bonds at par and classifies their investment as AFS, Unfortunately, a combination of problems at Taylor Company and in the debt market caused the fair value of the Taylor investment to decline to $1,320,000 during 2018. Consider each of the following as independent situation. 1. Bloom now believes it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to...