Prepare journal entries to record the preceding information

Reference no: EM132482347

Point 1: On January 1, 2019, Rodgers Company purchased $200,000 face value, 10%, 3-year bonds for $190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31.

Required:

Question 1: Record the purchase of the bonds. 2.Prepare an investment interest income and discount amortization schedule using the effective interest method. 3.Record the receipts of interest on June 30, 2019, and June 30, 2021.

Point 2: Southeast Bank invests in equity securities and prepares quarterly financial statements. At the beginning of the fourth quarter of 2019, the bank held as an investment in equity securities 200 shares of Eglan Company common stock that originally cost $5,500. At that time, these securities had a fair value of $5,200. During the fourth quarter, the bank engaged in the following transactions:

Oct. 26 Purchased 300 shares of Farrell Company common stock for $35 per share.Nov. 26Sold 200 shares of Eglan common stock for $25 per share.Dec. 10Purchased 400 shares of Gray Company common stock for $41 per share.On December 31, 2019, the quoted market prices of the shares were as follows: Eglan Company, $52 per share; Farrell Company, $38 per share; and Gray Company, $40 per share.

Required:

Question 2: Prepare journal entries to record the preceding information for the fourth quarter.2.Show what the bank reports on its fourth quarter 2019 income statement for these equity securities.3.Show how the bank reports this investment in equity securities on its balance sheet at the end of the fourth quarter of 2019.4.Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for trading securities?

Point 3: On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2021. Worthylake carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown's incremental borrowing rate was 12%.

Required:

Question 3: Prepare the journal entries on Worthylake's books to record:1.sale of the machinery2.related adjusting entries on December 31, 2019, and 20203.payment of the note by Brown on January 1, 2021

Reference no: EM132482347

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