Complete 2019 amounts. Colah Company purchased $1.2 million of Jackson, Inc., 8%
ID: 2330078 • Letter: C
Question
Complete 2019 amounts.
Colah Company purchased $1.2 million of Jackson, Inc., 8% bonds at par on July 1, 2018, with interest paid semi-annually. Colah determined that it should account for the bonds as an available-for-sale Investment. At December 31, 2018, the Jackson bonds had a fair value of $1.42 million. Colah sold the Jackson bonds on July 1, 2019 for $1,080,000. a. The purchase of the Jackson bonds on July 1 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 entries necessary upon sale of the Jackson bonds on July 1, 2019, Including updating the falr-value adjustment, recording any reclassification adjustment, and recording the saleExplanation / Answer
Answer
Working
Working #1: Loss debited to Net Income
A
Fair Value of Available for Sale securities on 1 Jan 2019
$ 1,420,000.00
B
Sold for
$ 1,080,000.00
C = A - B
Total Loss on Sale of securities
$ 340,000.00
D
Balance in the OCI
$ 220,000.00
E = C - D
Loss on Sale debited to Net Income
$ 120,000.00
Working #2: Journal Entry for Sale
Accounts
Debit
Credit
Cash [amount realized]
$ 1,080,000.00
Gain on Sale - OCI [existing from 2018]
$ 220,000.00
Loss on Sale [balancing Figure]
$ 120,000.00
Available for Sale Securities [existing at Fair Value]
$ 1,420,000.00
(Available for sale securities sold)
Working
Working #3: Amount of Net Income to be entered in Requirement
A
Interest [1 Jan 2019 to 30 June 2019]
$ 48,000.00
B
Loss on Sale debited to Net Income
$ (120,000.00)
C = A + B
Net Income
$ (72,000.00)
2,018
2,019
Total
Net Income
$ 48,000.00
$ (72,000.00) –[working #3]
$ (24,000.00)
OCI
$ 220,000.00
$ (220,000.00)
$ -
Comprehensive Income
$ 268,000.00
$ (292,000.00)
$ (24,000.00)
Working
Working #1: Loss debited to Net Income
A
Fair Value of Available for Sale securities on 1 Jan 2019
$ 1,420,000.00
B
Sold for
$ 1,080,000.00
C = A - B
Total Loss on Sale of securities
$ 340,000.00
D
Balance in the OCI
$ 220,000.00
E = C - D
Loss on Sale debited to Net Income
$ 120,000.00
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