Reference no: EM132692331
Problem - Soto Industries Inc. is an athletic footware company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Soto Industries Inc., which has a fiscal year ending on December 31:
Year 1
Apr. 1. Purchased $100,000 of Welch Co. 6%, 15-year bonds at their face amount plus accrued interest of $500. The bonds pay interest semiannually on March 1 and September 1.
June 1. Purchased $210,000 of Bailey 4%, 10-year bonds at their face amount plus accrued interest of $700. The bonds pay interest semiannually on May 1 and November 1.
Sept. 1. Received semiannual interest on the Welch Co. bonds.
30. Sold $40,000 of Welch Co. bonds at 97 plus accrued interest of $200.
Nov. 1. Received semiannual interest on the Bailey bonds.
Dec. 31. Accrued $1,200 interest on the Welch Co. bonds.
31. Accrued $1,400 interest on the Bailey bonds.
Year 2
Mar. 1. Received semiannual interest on the Welch Co. bonds.
May 1. Received semiannual interest on the Bailey bonds.
Instructions -
1. Journalize the entries to record these transactions.
2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?