Prepare the adjusting entry to record these bonds

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Vilander Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Vilander, whose fiscal year ends on December 31.

2014

   

Jan. 1

 

Purchased at face value $1,300,000 of Javier Nursing Centers, Inc., 10-year, 7% bonds dated January 1, 2014, directly from Javier.

July 1

 

Received the semiannual interest on the Javier bonds.

Dec. 31

 

Accrual of interest at year-end on the Javier bonds.

(Assume that all intervening transactions and adjustments have been properly recorded and that the number of bonds owned has not changed from December 31, 2014, to December 31, 2016.)

2017

   

Jan. 1

 

Received the semiannual interest on the Javier bonds.

Jan. 1

 

Sold $650,000 Javier bonds at 104.

July 1

 

Received the semiannual interest on the Javier bonds.

Dec. 31

 

Accrual of interest at year-end on the Javier bonds.

A. Journalize the listed transactions for the years 2014 and 2017.

B. Assume that the fair value of the bonds at December 31, 2014, was $1,430,000. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value.

C. Based on your analysis in part (b), show the balance sheet presentation of the bonds and interest receivable at December 31, 2014. Assume the investments are considered long-term.


Reference no: EM131018027

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