Question

Sunland Company purchased, on January 1, 2020, as an available-for-sale security, $70,000 of the 9%, 5-year bonds of Chester Corporation for $64,826, which provides an 11% return.

Prepare Sunland’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $66,500. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
(a)	enter an account title to record the item under point A	enter a debit amount	enter a credit amount
	enter an account title to record the item under point A	enter a debit amount	enter a credit amount
(b)	enter an account title to record the item under point B	enter a debit amount	enter a credit amount
	enter an account title to record the item under point B	enter a debit amount	enter a credit amount
	enter an account title to record the item under point B	enter a debit amount	enter a credit amount
(c)	enter an account title to record the item under point C	enter a debit amount	enter a credit amount
	enter an account title to record the item under point C	enter a debit amount	enter a credit amount

Answer 1

Answer
No.	Account Titles and Explanation	Debit	Credit
a	Debt Investments (Available-for-Sale)	$     64,826
	Cash		$     64,826
b	Cash	$       6,300		70000*9%
	Debt Investments (Available-for-Sale)	$          831
	Interest Revenue		$       7,131	64826*11%
c	Fair Value Adjustment (Available-for-Sale)	$          843		66500-(64826+831)
	Unrealized Holding Gain or Loss—Equity		$          843