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On July 1, 2019, Slick Rocks, Inc., purchased at par $350,000, 6 percent bonds of Sandstone...

On July 1, 2019, Slick Rocks, Inc., purchased at par $350,000, 6 percent bonds of Sandstone Company as an investment that the management intends to hold for a few years but not to maturity. The bonds pay interest each June 30 and December 31. Slick Rocks’ fiscal year ends on December 31. The following information pertains to the price of the Sandstone bonds: Bond Price 12/31/2019 $ 356,000 12/31/2020 352,000 Slick Rocks sold the Sandstone bonds on June 30, 2021, at a price of $353,000. Prepare any journal entries that are required by the facts presented in the case. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the purchase of investments at par on July 1, 2019.

Record the interest received for the period ending December 31, 2019.

Recognize the fair value of investments on 12/31/2019.

Record the interest received for the period ending June 30, 2020.

Record the interest received for the period ending December 31, 2020.

Recognize the fair value of investments on 12/31/2020.

Record the interest received for the period ending June 30, 2021.

Recognize the fair value of investments on 12/31/2021.

Reclassify the net unrealized gain (loss) in Other Comprehensive Income on the sale of investments on June 30, 2021.

Record the cash received from sale of investments on July 1, 2021.

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Answer:

No. Date General Journal Debit Credit
1 July.01, 2019 Investment in bonds $      350,000
     Cash $     350,000
2 Dec.31, 2019 Cash            10,500
     Interest revenue           10,500
3 Dec.31, 2019 Fair value adjustment               6,000
     Unrealized holding gain-OCI             6,000
4 Jun.30, 2020 Cash            10,500
     Interest revenue           10,500
5 Dec.31, 2020 Cash            10,500
     Interest revenue           10,500
6 Dec.31, 2020 Unrealized holding gain-OCI               4,000
     Fair value adjustment             4,000
7 Jun.30, 2021 Cash            10,500
     Interest revenue           10,500
8 Jun.30, 2021 Fair value adjustment               1,000
     Unrealized holding loss-OCI             1,000
9 Jun.30, 2021 Reclassification adjustment-OCI               3,000
     Fair value adjustment             3,000
10 Jun.30, 2021 Cash          353,000
     Income-NI             3,000
     Investment in bonds         350,000
1 1
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