Homework Answers
Ans.
| Date | General Journal | Debit | Credit |
| 27-Dec | Short term Investment - Trading | $ 66,000.00 | |
| Cash | $ 66,000.00 | ||
| [Being purchase of investment recorded] | |||
| 31-Dec | Fair Value Adjustment - Trading | $ 6,000.00 | |
| Unrealized Gain - Income | $ 6,000.00 | ||
| [Being Fair value of investment recorded] | |||
| 3-Jan | Cash | $ 4,000.00 | |
| Gain on sale of short term Investment | $ 1,000.00 | ||
| Short term Investment - Trading | $ 3,000.00 | ||
| [Being sale of proportion of Investment recorded] |
Note
1.Fair Value Adjustment - Trading = $ 72,000 - $ 66,000 = $ 6,000
2.Gain on sale of short term Investment = $4,000 - $3,000 = $ 1,000
2.
| Date | General Journal | Debit | Credit |
| 15-Jun | Short term Investment -HTM (Remedy) | $ 1,000.00 | |
| Cash | $ 1,000.00 | ||
| [Being purchase of 90-day, 10% debt securities recorded] | |||
| 16-Sep | Cash | $ 1,025.00 | |
| Short term Investment -HTM (Remedy) | $ 1,000.00 | ||
| Interest Revenue | $ 25.00 | ||
| [Being proceeds from debt securities with interest recorded] |
Note
1. Interest Revenue = Principal * Rate * Time
= $ 1,000 * 10% * 90/360 = $ 25
(It is assumed that there are 360 days in a year)
3.
| Date | General Journal | Debit | Credit |
| 1- Aug | Short term Investment -AFS (Houtte) | $ 50,000.00 | |
| Cash | $ 50,000.00 | ||
| [Being purchase of 9% debt securities recorded] | |||
| 30-Oct | Cash | $ 1,125.00 | |
| Interest Revenue | $ 1,125.00 | ||
| [Being interest received in cash] |
Note:
1. Interest Revenue = Principal * Rate * Time
= $ 50,000 * 9% * 90/360 = $ 1,125
(It is assumed that there are 360 days in a year)
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Prepare journal entries to record the following transactions
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On June 15, paid $278,000 cash to purchase Remedy’s 90-day
short-term debt securities ($278,000 principal), dated June 15,
that pay 5% interest (categorized as held-to-maturity
securities).
On September 16, received a check from Remedy in payment of the
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