Question

Colah Company purchased $1 million of Jackson, Inc., 8% bonds at paron July 1 2018, with interest paid semi-annually. Colah determined that it should account for the bonds as an available for sale investment. At December 31, 2018, the Jackson bonds had a fair value of $131 million. Colah sold the Jackson bonds on July 1 2019 for $990,000 a. The purchase of the Jackson bonds on July 1 binterest revenue for the last half of 2018 c. Any year-end 2018 adjusting entries d orest revenue for the first half of 2019 e. Any entries necessary upon sale of the Jackson bonds on July 1 2019, including updating the fair value adjustment, recording any recia t ion adustment and recording the sale Required: 1. Prepare Colah's Journal entries for above transaction 2. Fill out the following table to show the effect of the Jackson bonds on Colah's net income other comprehensive income, and comprehensive income for 2018, 2019, and cumulatively over 2018 and 2019 Complete this question by entering your answers in the tabs below. red2 Penc thet a r ian try required to transaction event, et "Noral entry required your answer in dolan, not in mons. S o beantra e d View r in it Journal entry worksheet

Answer 1

ANSWER

• All working forms part of the answer
• You have already done ‘2018’ part.
• Workings for 2019’s part:

Working	Working #1: Loss debited to Net Income
A	Fair Value of Available for Sale securities on 1 Jan 2019	$      1,310,000.00
B	Sold for	$ 990,000.00
C = A - B	Total Loss on Sale of securities	$          320,000.00
D	Balance in the OCI	$          210,000.00
E = C - D	Loss on Sale debited to Net Income	$          110,000.00

Working #2: Journal Entry for Sale
Accounts	Debit	Credit
Cash [amount realized]	$ 990,000.00
Gain on Sale - OCI [existing from 2018]	$        210,000.00
Loss on Sale [balancing Figure]	$        110,000.00
Available for Sale Securities [existing at Fair Value]		$ 1,310,000.00
(Available for sale securities sold)

Working	Working #3: Amount of Net Income to be entered in Requirement
A	Interest [1 Jan 2019 to 30 June 2019]	$            44,000.00
B	Loss on Sale debited to Net Income	$        (110,000.00)
C = A + B	Net Income	$          (66,000.00)

• Requirement completed below:

	2,018	2,019	Total
Net Income	$            44,000.00	$                (66,000.00) –[working #3]	$      (22,000.00)
OCI	$          210,000.00	$              (210,000.00)	$                         -
Comprehensive Income	$          254,000.00	$              (276,000.00)	$       (22,000.00)

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