Question

CALORAO PRINV ON BACK Exercise 17-21 Presented below is selected information related to the financial instruments of Headiand Company at December 31, 2017. This is Headand Company's first year of operations Fair Value (at December 31) Carrying Amount Investment in debt securities (intent is to hold to maturity) Investment in Chen Company stock Bonds payable $36,700 $37,700 834.200 730,600 237,500 212.100 a) Headiand elects to use the fair value option for these financial instruments (the fair value opttion for financial labtes is distused in Chepter 14). Asuming thet Headiand's net income is 9400 in 2017 before reporting any securties ains or losses, determine Headland's net income for 2017 (essume that the dfference bebween the carying vele and far value is due to credit deterioretion) eadiand's net income for 2017 ) Record the journal entry, if any, necessary at December 31, 2017, to record the fair value opttion for the bonds pevabe (Credit acceunt les are automatically indented when ameunt is entered. De not indent manually. ne atry is required, select "No Entry for the account titles and enter o for the amounts) Credit Date Debit Account Titles and Explanation . 31, 2017 HoW LISE O ACCOUNES LINK tO I SAt FORLAER SHET ANW Question Attempts: 0 of 3 used

Answer 1

Headland Company Requirement a Net Income before reporting securities Unrealized Holding Gains Net Income 94,800 1,30,000 2,24,800 Requirement b DR CR 1,000 1. Debt Investments Unrealized Holding Gain 1,000 2. Equity Investments Unrealized Holding Gain 1,03,600 1,03,600 25,400 3. Bonds Payable Unrealized Holding Gain 25,400