Question

Colah Company purchased $1,000,000 of Jackson, Inc., 5% bonds at their face amount on July 1, 2021, with interest paid 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 $1,200,000. Colah sold the Jackson bonds on July 1, 2022 for $900,000. 

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 

Prepare Colah's journal entries for above transactions. (If no entry is requir in the first account field. Enter your answers in whole dollars.) 

View transaction list 

1 Record the purchase of the Jackson bonds on July 1. 

2 Record the interest revenue for the last half of 2021. 

3 Record the entry to adjust to fair value at year end. 

4 Record the interest revenue for the first half of 2022. 

5 Record the entry to adjust to fair value on the date of sale. 

6 Record the sale of the Jackson bonds on July 1, 2022.

1. Prepare Colah's journal entries for above transactions. 

2. Complete the following table to show the effect of the Jackson bonds on Colah comprehensive income for 2021, 2022, and cumulatively over 2021 and 2022. 

Answer 1

Date Answer: 1) Journal entries :- parliculars TIF Debit T credit 202) | Investment in Bonds Ale L$1,000,000 or pia $ 1,000,000 1. To cash Being the purchase of the Jackson bonds] Dec-21 Cash Ale $1,000,000x5%/27 Dr $25,000 To Interest Revenue *25000 Being the Interest revenue for the half year] $200,000 $200,000 Uuvealized. Fair value Adjustment Ac By - To Gain on investment - 1.200,000 - $1000,0007 being the adjustment of fair value] Cash Ale [1,000,000x5127 or . To Interest revence Being the Interest revence for LO26 $25.000 Jun-sol $ 25,000 The half year] Judas Loss on investment-unvealized to $300,000 TO Fair value adjustment $300,000 [$1,200,000-$900,000] Being record the unrealised loss cash Ale $900,000 Fair value adjustment Ale or $100.000 To Investment in bonds $1.000000 Being the sale of Jackson's bonds | 2) calculation of comprehensive income. I 2021 2022 Total Net Income $225,000 K 275,000) R$ 50,000) £25,000+. 25,000- 200,000 $300,0007 Add: OCI $0 $0 comprehensive income $285,000 ($275,000) (59000)