Homework Answers
Answer - 1
Investments which are neither held for maturity nor for the purpose
of trading are termed as investments available for sale.
These are those debt investments that are expected to sell in the
short run.
Answer -2 & 3
Treatment - These are reported on the balance sheet at fair
value.
Revaluation - However, any unrealized gain and losses arising out
in such securities are not recognized in the Income Statement but
are reported in other comprehensive income as a part of
shareholders’ equity.
Fair Value < Book value = Unrealized Loss
Fair Value > Book Value = Unrealized Gain
Please refer to the last 2 entries for the main answer. First Entry is just for the understanding.
Explanation -
1. On December 2021, the fair value of the investment has reduced to $58 Million accounting an unrealized loss of $2.00 Million. Hence, loss being receognized in the entry.
2. On December 2022, the fair value of the investment
has increased to $61 Million accounting an unrealized gain of $3.00
Million. Hence, we need to reverse the loss which we have earlier
recognised on the investment at the year end i.e december 2021 and
book the excess unrealized gain arising from the revaluation of the
investments.
Loss Reversed - $2.00 million
Gain Booked - $1.00 million
That will bring the investment at book value of $61.00 in the books.
Add Answer to:
On February 18, 2021, Joey Co. purchased Debt of IBM as a long-term investment for $60...
On February 18, 2021, Joey Co. purchased Debt of IBM as a long-term investment for $60...
On February 18, 2021, Joey Co. purchased Debt of IBM as a long-term investment for $60 Million at par. Joey Co. does not intend to hold this Debt Investment till maturity but also, does not intend to sell it in the short-term. On December 31, 2021, and December 31, 2022, the market value of Joey’s Co’s Debt Investment is $58 Million and $61 Million, respectively. Required: 1. What is appropriate reporting category for this investment? Why? 2. Prepare the adjusting...
On February 18, 2021, Joey Co. purchased Debt of IBM as a long-term investment for $60...
On February 18, 2021, Joey Co. purchased Debt of IBM as a long-term investment for $60 Million at par. Joey Co. does not intend to hold this Debt Investment till maturity but also, does not intend to sell it in the short-term. On December 31, 2021, and December 31, 2022, the market value of Joey’s Co’s Debt Investment is $58 Million and $61 Million, respectively. Required: 1. What is appropriate reporting category for this investment? Why? 2. Prepare the adjusting...
On February 18, 2021, Union Corporation purchased 2,291 IBM bonds as a long-term investment at their...
On February 18, 2021, Union Corporation purchased 2,291 IBM bonds as a long-term investment at their face value for a total of $2,291,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $2,233,000 and $2,320,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a transaction/event, select...
On February 18, 2021, Union Corporation purchased 1,056 IBM bonds as a long-term investment at their...
On February 18, 2021, Union Corporation purchased 1,056 IBM bonds as a long-term investment at their face value for a total of $1,056,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,024,000 and $1,072,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a transaction/event, select...
As a long-term investment at the beginning of the fiscal year, Joey Co. purchased 30% of...
As a long-term investment at the beginning of the fiscal year, Joey Co. purchased 30% of Legoria Supplies, Inc.'s, (a total of 8 million shares) for $56 Million. The fair value and book value of the shares were the same at that time. During the year, Legoria Supplies Inc. earned net income of $50 million and distributed cash dividends of $1.25 per share. At the end of the fiscal year, the fair value of the shares acquired by Joey Co....
As a long-term investment at the beginning of the fiscal year, Joey Co. purchased 30% of...
As a long-term investment at the beginning of the fiscal year, Joey Co. purchased 30% of Legoria Supplies, Inc.’s, (a total of 8 million shares) for $56 Million. The fair value and book value of the shares were the same at that time. During the year, Legoria Supplies Inc. earned net income of $50 million and distributed cash dividends of $1.25 per share. At the end of the fiscal year, the fair value of the shares acquired by Joey Co....
Tanner-UNF Corporation acquired as a long-term investment $360 million of 8.0% bonds, dated July 1, on July 1, 2021.
Tanner-UNF Corporation acquired as a long-term investment $360 million of 8.0% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $330.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at...
Tanner-UNF Corporation acquired as a long-term investment $290 million of 6.0% bonds, dated July 1, on July 1, 2021.
Tanner-UNF Corporation acquired as a long-term investment $290 million of 6.0% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $260.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at...
Mills Corporation acquired as a long-term investment $245 million of 8% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $245 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $280.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at...
Mills Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $280.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at...
On February 18, 2021, Union Corporation purchased 2,291 IBM bonds as a long-term investment at their face value for a total of $2,291,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $2,233,000 and $2,320,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a transaction/event, select...
As a long-term investment at the beginning of the fiscal year, Joey Co. purchased 30% of Legoria Supplies, Inc.'s, (a total of 8 million shares) for $56 Million. The fair value and book value of the shares were the same at that time. During the year, Legoria Supplies Inc. earned net income of $50 million and distributed cash dividends of $1.25 per share. At the end of the fiscal year, the fair value of the shares acquired by Joey Co....
Mills Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $280.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at...
Most questions answered within 3 hours.
-
find the critical value associated with a right sided hypothesis of
the mean using a sample...
asked 1 hour ago -
Which of the following statements is true with respect to a
simple linear regression model?
a....
asked 2 hours ago -
The energy required to remove an electron from a surface of a
solid element is called...
asked 3 hours ago -
How would you train your employees to avoid risks of using
mobile devices?
asked 4 hours ago -
Assume Kw = 1.01 ✕ 10−14
For pure water, we can calculate [H3O+ ] = [OH...
asked 4 hours ago -
Suppose that on a temperature scale X, water boils at 203.0°X
and freezes at -105.7°X. What...
asked 5 hours ago -
BaS crystallizes in a cubic unit cell with S2- ions on each
corner and each face....
asked 6 hours ago -
A. 0≤P(Oi)≤10≤P(Oi)≤1 for each i
B. P(Oi)≤0P(Oi)≤0
C. P(Oi)=1+P(OCi)P(Oi)=1+P(OiC)
D. P(Oi)≥1P(Oi)≥1
If an experiment consists of...
asked 7 hours ago -
A battery has an emf of 9.20V and an internal resistance of 1.20
ohm. a)What resistance...
asked 7 hours ago -
The area of an elastic circular loop decreases at a constant
rate, dA/dt = −6.60×10−3 m2/s...
asked 8 hours ago -
The denaturation of proteins can be described by the
equilibrium
F⇌U
where F and U represent...
asked 10 hours ago -
Please answer what the maximum and minimum force is, and the
angle on the ion is...
asked 10 hours ago