Question

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Exercise 12-12 (Algo) Available-for-sale securities (LO12-1, 12-4] Colah Company purchased $2,200,000 of Jackson, Inc., 7% bonds at par on July 1, 2021, with Interest pald semi-annually. Colah determined that it should account for the bonds as an available-for-sale Investment. At December 31, 2021, the Jackson bonds had a fair value of $2.520,000. Colah sold the Jackson bonds on July 1, 2022 for $1,980,000. Required: 1. Prepare Colah's Journal entries for the following transactions: a. The purchase of the Jackson bonds on July 1. b. Interest revenue for the last half of 2021. C. Any year-end 2021 adjusting entries. d. Interest revenue for the first half of 2022 e. Any entries necessary upon sale of the Jackson bonds on July 1, 2022, Including updating the falr-value adjustment, recording any reclassification adjustment, and recording the sale. 2 Complete the following table to show the effect of the Jackson bonds on Colah's net income, other comprehensive Income, and comprehensive Income for 2021, 2022, and cumulatively over 2021 and 2022 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare Colah's journal entries for above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answer in whole dollars, not in millions.) View transaction lat Journal entry worksheet Record the purchase of the Jackson bonds on July 1. Note: Enter debits before credits General Journal Debit Credit July 01, 2021 Record entry Clear entry View general Journal Required 1 Required 2 >

Answer 1

Account Title & Explanation Debit Credit Date 2021 1-Jul Investment in Bonds 10 2,200,000 Cash 11 2,200,000 (To record investment in bonds) 12 13 31-Dec Cash 77,000 14 Interest Revenue (2200000 *7%*6/12) 15 77,000 (To record receipt of interest revenue) 16 17 31-Dec Fair Value Adjustment (2520000-2200000) Gain on Investments (Unrealized,NI) 18 320,000 320,000 19 (T record increase in fair Value) 20 21 22 2022 1-Jul Cash 77,000 23 Interest Revenue (2200000 *7%*6/12) 24 77,000 (To record receipt of interest revenue) 25 26 1-Jul Loss on Investment (Unrealized ,NI) 540,000 27 Fair Value Adjustment (To record adjusting entry) (2520000-1980000) 28 540,000 29 30 9.

1-Jul Cash 32 1,980,000 Fair Value Adjustment 33 220,000 Investment in Bonds 34 2,200,000 |(To record sale of investment) 35 36 37 Fill out the following table to show the effect of the Jackson bonds on Colah's net income, other compr 38 income, and comprehensive income for 2021, 2022, and cumulatively over 2021 and 2022. 39 2021 2022 Total 40 Net Income 41 OCI 42 Comprehensive Income Total 43 2,021 2,022 44 Net Income 77,000 77,000 (540,000) (463,000) 154,000 320,000 (220,000) (66,000) 45 OCI Comprehensive Income 46 397,000 47