Colah Company purchased $1.7 million of Jackson, Inc. 5% bonds at par on July 1,
ID: 2611507 • Letter: C
Question
Colah Company purchased $1.7 million of Jackson, Inc. 5% 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 $1.97 million. Colah sold the Jackson bonds on July 1, 2019 for $1,530,000 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 entry or entries necessary upon sale of the Jackson bonds on July 1, 2019 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 Answer is not complete. Complete this question by entering your answers in the tabs below Required 1 Required 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. (Amounts to be deducted should be indicated with a minus sign.) 2018 2019 Total Net Income ocl Comprehensive 0 IncomeExplanation / Answer
1.Colah’s Journal Entry (Amount in $)
Date
Particular
Debit
Credit
Purchase of Bonds
Jul 1, 2018
Investment In Bond
1,700,000
To Cash
1,700,000
Interest Received on Bonds
Dec 31, 2018
Cash
42,500
To Interest on Investment
42,500
Fair Value Adjustment of Bonds
Dec 31, 2018
Fair Value Adjustment in Investment
270,000
To Unrealised Gain
270,000
Interest received and due for first half
Jun 30, 2019
Cash
42,500
Prepaid Interest on Investment
42,500
To Interest on Investment
85,000
Bonds Sold
Jul 1, 2019
Cash
1530,000
Interest Income
42,500
Loss on Sale of Investment
440,000
To Investment
1,700,000
To Fair Value adjustment in Investment
270,000
To Prepaid Interest on Investment
42,500
2.Colah’s Income statement (Amount in $)
Particular
2018
2019
Net Income
42,500
42,500
Other Comprehensive Income:
Add: Unrealised gain
2,70,000
Less: Loss on sale of Investment
-440,000
Comprehensive Income
312,500
-397,500
Date
Particular
Debit
Credit
Purchase of Bonds
Jul 1, 2018
Investment In Bond
1,700,000
To Cash
1,700,000
Interest Received on Bonds
Dec 31, 2018
Cash
42,500
To Interest on Investment
42,500
Fair Value Adjustment of Bonds
Dec 31, 2018
Fair Value Adjustment in Investment
270,000
To Unrealised Gain
270,000
Interest received and due for first half
Jun 30, 2019
Cash
42,500
Prepaid Interest on Investment
42,500
To Interest on Investment
85,000
Bonds Sold
Jul 1, 2019
Cash
1530,000
Interest Income
42,500
Loss on Sale of Investment
440,000
To Investment
1,700,000
To Fair Value adjustment in Investment
270,000
To Prepaid Interest on Investment
42,500