Question

b. Dispoon actions during 2018, 5-11 Accounting for debt investments Peyton Investments completed the following investment transactions de he Vedder bond pays 2018 or company's $400,000 bond at face value. Pevt classified the investment as available-for-sale. The Vedder bo interest at the annual rate of 4% on June 30 and December 31 matures on December 31, 2021. Management's intent is to keep thi bonds for several years. Jun. 30 Received an interest payment from Vedder. Dec. 31 Received an interest payment from Vedder. 31 Adjusted the investment to its current market value of $396,000.

Answer 1

Answer:

1.)

Date	Particulars	Debit ($)	Credit ($)
Jan 5 2018	Available for sale Debt Investment	400,000
	Cash		400,000
	(Record entry for purchase of Bond Investment)
Jan 30 2018	Cash	8,000
	Interest Revenue ($400,000 x 4% x 1/2)		8,000
	(Record entry for receiving cash interest)
Dec 31 2018	Cash	8,000
	Interest Revenue ($400,000 x 4% x 1/2)		8,000
	(Record entry for receiving cash interest)
Dec 31 2018	Unrealised Holding loss - Available for sale ($400,000 - $396,000)	4,000
	Fair value adjustment account - Available for sale		4,000
	(Record entry for adjusting the debt investment to market value)

2.)

SI Balance Sheet (Partial) December 31, 2018
Long term Assets:
Available for sale Debt Investment (at fair value; cost $400,000)	$396,000

3.)

SI Income Statement (Partial) For the year ended December 31, 2018
Net Income	$200,000
Other Income and Expenses
Unrealized holding loss - Available for sale Debt Investments	($4,000)
Interest Revenue	16,000
Comprehensive Income	$212,000