Colah Company purchased $1.9 million of Jackson, Inc., 7% bonds at par on July 1
ID: 2545971 • Letter: C
Question
Colah Company purchased $1.9 million of Jackson, Inc., 7% bonds at par on 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 $2.19 million. Colah sold the Jackson bonds on July 1, 2019 for $1,710,000 a. The purchase of the Jackson bonds on July1. b. Interest revenue for the last half of 2018 c. Any year-end 2018 adjusting entries d. Interest 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 reclassification adjustment, 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 Required 1 Required 2 Prepare Colah's journal entries for above transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answer in dollars, not in millions. (i.e. 5 should be entered as 5,000,000)) View transaction list Journal entry worksheet Record the purchase of the Jackson bonds on July 1 Note: Enter debits before credits. Date General Journal Debit Credit July 01, 2018Explanation / Answer
Date Particulars Dr. Cr. 01-Jul-18 Available for sale security 1,900,000.00 Cash 1,900,000.00 (AFS security purchased at par) 31-Dec-18 Cash 66,500.00 Interest Income (1900000*(0.07/2)) 66,500.00 (interest received on AFS security) 31-Dec-18 Available for sale security 290,000.00 Unrealized gain/loss – other comprehensive income 290,000.00 (unrealised profit on fair value adjustment of AFS security recorded) 30-Jun-19 Cash 66,500.00 Interest Income (1900000*(0.07/2)) 66,500.00 (interest received on AFS security) 30-Jun-19 Unrealized gain/loss – other comprehensive income 480,000.00 Available for sale security 480,000.00 (unrealised loss on fair value adjustment of AFS security recorded) 30-Jun-19 Realized gain/loss on sale of AFS security (recorded in P&L) 190,000.00 Unrealized gain/loss – other comprehensive income 190,000.00 (reclassification of unrealised gain/loss to realised gain/loss on sale of AFS security) 30-Jun-19 Cash 1,710,000.00 Available for sale security 1,710,000.00 (AFS security sold)