I have a question in regards to the fair value adjustment in this problem. On 1/1/19...
I have a question in regards to the fair value adjustment in this problem.
On 1/1/19 Thomas purchased $300,000 in 8% 5 year bonds when the effective interest rate was 10%. The bonds pay interest on 12/31 each year. Thomas has a 12/31 year end. These bonds are considered available for sale
- Prepare journal entries for the bonds for 2019 and 2020 assuming the following fair value information: 12/31/19 $250,000 and 12/31/20 $265,000.
I have calculated the amortization for the bonds. For 2019 I have the carrying value at 280,980 and for 2020 I have the carrying value at 285,079. I calculated between the carrying value and fair value and got 30,980 for 2019 and 20,079 for 2020. My question is on what should be recorded for the 2020 adjustment? For 2019 I have recorded:
Unrealized Holding G/L-OCI 30,980
FV Adjustment 30,980
Should 2020 be recorded at the amount of 20,079 or should it be the difference between 30,980 and 20,079?
Homework Answers
| Fair value adjustment Balance as at 2019 | 30980 credit |
| Fair value adjustment Balance as at 2020 | 20079 credit |
| Decrease in fair value adjustment | 10901 Debit |
| Date | Account title | Debit | credit |
| 2020 | Fair value adjustment | 10901 | |
| Unrealized Holding G/L-OCI | 10901 |
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I have a question in regards to the fair value adjustment in
this problem.
On 1/1/19...
Fair Value Adjustment
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1) Record the entry for fair value adjustment of
December 31, 2021.
2)Record the entry to adjust to fair value on the date
of sale
3) Record the entry to reverse the previous fair value
adjustment.
4) Record the entry for sale of investment in Coca
Cola bonds.
S&L Financial buys and sells securities which it classifies as available for sale. On December 27 2021. S&L purchased Coca-Cola bonds at par for $885,000 and sold the bonds on January 3,...
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adjustment to fair value at date of disposal, to record disposal,
and to reclassify holding gain.
On April 11, 2020, Novak Corp. purchased as a long-term investment (accounted for using FV-OCI without recycling) 5,700 common shares of Roddy Ltd. for $70 per share, which represents a 2% interest. On December 31, 2020, the shares market price was $77 per share. On March 3, 2021, Novak sold all 5,700 shares of Roddy...
Exercise 9-14
On July 1, 2020, Flounder Aggregates Ltd. purchased 6% bonds
having a maturity value of $85,000 for $88,048. The bonds provide
the bondholders with a 5% yield. The bonds mature four years later,
on July 1, 2024, with interest receivable June 30 and December 31
of each year. Flounder uses the effective interest method to
allocate unamortized discount or premium. The bonds are accounted
for using the FV-OCI model with recycling. Flounder has a calendar
year end. The...
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forget it
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interest at the effective rate. Federal elected the option to
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