Question

On February 1, 2018. Lee Co. decides to invest excess cash of 518,800 by purchasing a Hart, Inc. bond at face value. At year-end, December 31, 2018, the fair value of the Hart bond was $21,500. The investment is categorized as a trading debt investment Read the requirements. Requirement 1. Joumalize the transactions for Lee's investment in Hart, Inc. for 2018 Record debits first, then credits. Select the explanation on the last line of the journal entry table. If no entry is required, select "No entry required" on the first line of the Accounts and Explanation column and leave the remaining cells blank.) Begin by journalizing Lee's investmen 0 Requirements Date Feb 1 1. Journalize the transactions for Lee's investment in Hart, Inc. for 2018 1. Jou 2. In what category and at what value would Lee report the asset on the December 31, 2018, balance sheet? In what account would the market price change in Hart's bond be reportedif at all? 3. What was the net effect of the investment on Lee's not income for the year ended December 31, 2018? Journalize the adjustment required Date Choose from any list or enter any number in the input neids and then continue to the next question

Answer 1

Requirement 1 Credit Date 01-Feb-18 Journal Accounts and Explanations Debit Hari, Inc. Bond (Trading) $ 18,000 Cash (To record trading debt instruments purchased for cash) $ 18,000 $ 3,500 31-Dec-18 Hari, Inc. Bond (Trading) (21500-18000) Unrealized gain on inventments (To record change in fair value of bonds)) $ 3,500 Requirement 2 Lee would report asset at $ 21,500 classified as Investments (Held for Trading) on the balance sheet as of December 31, 2018. The market price change would be unrealized gain on investments of $ 3,500 transferred to the Net Income. Requirement 3 Lee's Net income for the year ended December 31, 2018 has increased. The amount by which the net income has changed is $3,500.