Colah Company purchased $2.3 million of Jackson, Inc. 6% bonds at par on July 1,
ID: 2611049 • Letter: C
Question
Colah Company purchased $2.3 million of Jackson, Inc. 6% bonds at par on July 1, 2018, with interest paid semi-annually. When the bonds were acquired Colah decided to elect the fair value option for accounting for its investment. At December 31, 2018, the Jackson bonds had a fair value of $2.63 million. Colah sold the Jackson bonds on July 1, 2019 for $2,070,000.
The purchase of the Jackson bonds on July 1.
Interest revenue for the last half of 2018.
Any year-end 2018 adjusting entries.
Interest revenue for the first half of 2019.
Any entry or entries necessary upon sale of the Jackson bonds on July 1, 2019.
Explanation / Answer
Journal entry :
Date accounts & explanation debit credit 2018 July 1 Investment in bonds a/c 23,00,000 Cash a/c 23,00,000 (To record investment in bonds) 2018 dec 31 Cash a/c (2300000*6%*6/12) 69000 Interest revenue a/c 69000 (To record interest revenue) 2018 dec 31 Investment in bonds a/c 330000 Unrealized gain 330000 (To record year end adjusting entry) 2019 July 1 Cash 69000 Interest revenue 69000 (To record interest) 2019 July 1 Cash 2070000 Loss on sale of investment 560000 Investment in bonds a/c 2630000 (To record sale of bonds)